Agreement between the
Government of the Republic of India and the Government of the United Arab
Emirates for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and on capital
Notification G.S.R. No.
710(E), dated 18th November, 1993
Whereas the annexed
agreement between the Government of the United Arab Emirates and the Government
of the Republic of India for the avoidance of double taxation and prevention of
fiscal evasion with respect to taxes on income and on capital has entered into
force on the 22nd September, 1993, after the notification by both the
Contracting States to each other of the completion of the proceedings required
by laws for bringing into force of the said agreement in accordance with
paragraph 1 of Article 30 of the said agreement:
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964),
and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central
Government hereby directs that all the provisions of the said agreement shall
be given effect to in the Union of India.
An Agreement between the
Government of the Republic of India and the Government of the United Arab
Emirates for the avoidance of double Taxation and the prevention of fiscal
evasion with respect to taxes on income and on capital
The Government of the
Republic of India and the Government of the United Arab Emirates--
Desiring to promote mutual
economic relations by concluding an agreement for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income
and on capital,
Have agreed as follows:
ARTICLE 1: Personal
Scope.--This agreement shall apply to persons who are residents of one or both
of the Contracting States.
ARTICLE 2: Taxes
Covered.--1. There shall be regarded as taxes on income and on capital all
taxes imposed on total income, on total capital, or on elements of income or of
capital including taxes on gains from alienation of movable or immovable
property as well as on capital appreciation.
2. The existing taxes to
which the agreement shall apply are :
(a) In United Arab Emirates:
(i) income-tax;
(ii) corporation
tax;
(iii) wealth-tax
(hereinafter referred to
as "U.A.E. tax");
(b) In India:
(i) the income-tax including any surcharge thereon;
(ii) the
surtax; and
(iii) the
wealth-tax
(hereinafter referred to
as "Indian tax").
3. This agreement shall
also apply to any identical or substantially similar taxes on income or capital
which are imposed at Federal or State level by either Contracting State in
addition to, or in place of, the taxes referred to in paragraph 2 of this
Article. The competent authorities of the Contracting State shall notify each
other of any substantial changes which are made in their respective taxation
laws.
ARTICLE 3: General
Definitions.--1. In this agreement, unless the context otherwise requires:
(a) the term "India" means the territory of India and
includes the territorial sea and air space above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdictions, according to the Indian law and in accordance with international
law;
(b) the term "U.A.E." means the United Arab Emirates
and when used in a geographical sense, means all the territory of the United
Arab Emirates including its territorial sea in which the U.A.E. laws relating
to taxation apply and any area beyond its territorial sea within which the
United Arab Emirates has sovereign rights of exploration for an exploitation of
resources of the seabed and its sub-soil and superjacent water resources in
accordance with international law;
(c) the terms "a Contracting State" and "the other
Contracting State" mean U.A.E. or India as the context requires;
(d) the term "tax" means "Indian tax" or
"U.A.E. tax" as the context requires, but shall not include any
amount which is payable in respect of
any default or omission in relation to the taxes to which this agreement
applies or which represents a penalty imposed relating to those taxes;
(e) the term "person" includes an individual, a
company, and any other entity which is treated as a taxable unit under the
taxation laws in force in the respective Contracting States;
(f) the term "company" means any body corporate or any
entity which is treated as a company or body corporate under the taxation laws
in force in the respective Contracting States;
(g) the terms "enterprise of a Contracting State" and
"enterprise of the other Contracting State" mean respectively, an
enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;
(h) the term "national" means:
(i) in the case of U.A.E. all individuals
possessing the nationality of U.A.E. in accordance with U.A.E. laws and any
legal person, partnership and other body corporate deriving its status as such
from the U.A.E. laws;
(ii) in the case of India, any individual
possessing the nationality of India and any legal person, partnership, or
association deriving its status as such from the laws in force in India;
(i) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise which has its place
of effective management in a Contracting State except when the ship or aircraft
is operated solely between places in the other Contracting State;
(j) the term "competent authority" means:
(i) in the case of U.A.E., the Minister of
Finance and Industry or his authorised representative; and
(ii) in the case of India, the Central
Government in the Ministry of Finance (Department of Revenue) or their
authorised representative.
2. As regards the
application of the agreement by a Contracting State, any term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the laws of that State concerning the taxes to which the agreement applies.
ARTICLE 4: Resident.--1.
For the purposes of this agreement, the term "resident of a Contracting
State" means any person who, under the laws of that State, is liable to
tax therein by reason of his domicile, residence, place of management, place of
incorporation or any other criterion of a similar nature.
2. Where by reason of the
provisions of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he
has a permanent home available to him; if he has a permanent home available to
him in both States, he shall be deemed to be a resident of the State with which
his personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available to him in
either State, he shall be deemed to be a resident of the State in which he has
an habitual abode;
(c) if he has an habitual abode in both States or in either of
them, he shall be deemed to be a resident of the State of which he is a
national;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting States shall settle the question by
mutual agreement.
3. Where by reason of the
provisions of paragraph 1, a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated.
ARTICLE 5: Permanent
Establishment.--1. For the purposes of this agreement, the term "permanent
establishment" means a fixed place of business through which the business
of an enterprise is wholly or partly carried on.
2. The term
"permanent establishment" includes especially:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a farm or
plantation;
(h) a building site or construction or
assembly project or supervisory activities in connection therewith, but only
where such site, project or activity continues for a period of more than 9
months;
(i) the furnishing of services including
consultancy services by an enterprise of a Contracting State through employees
or other personal in the other Contracting State, provided that such activities
continue for the same project or connected project for a period or periods
aggregating to more than 9 months within any twelve-month period.
3. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:
(a) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise, or of collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the
purpose of carrying on, for the enterprise, any other activity of a preparatory
or auxiliary character.
4. Notwithstanding the
provisions of paragraph 1 and 2, where a person--other than an agent of
independent status to whom paragraph 5 applies--is acting on behalf of an
enterprise and has, and habitually exercises in a Contracting State an
authority to conclude contracts on behalf of the enterprise, that enterprise
shall be deemed to have a permanent establishment in that State in respect of
any activities which that person undertakes for the enterprise, unless the
activities of such person are limited to the purchase of goods or merchandise
for the enterprise.
5. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent or any other agent of an
independent status, provided that such persons are acting in the ordinary
course of their business. However, when the activities of such an agent are
devoted wholly or almost wholly on behalf of that enterprise, he will not be
considered an agent of an independent status within the meaning of this
paragraph.
ARTICLE 6: Income from
Immovable Property.--1. Income derived by a resident of a Contracting State
from immovable property (including income from agriculture or forestry)
situated in the other Contracting State may be taxed in that other State.
2. The term
"immovable property" shall have the meaning which it has under the
law of the Contracting State in which the property in question is situated. the
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as immovable
property.
3. The provisions of
paragraph 1 shall also apply to income derived from the direct use, letting, or
issue in any other from of immovable property.
4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
ARTICLE 7: Business
Profits.--1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only so much of them as is attributable to
that permanent establishment.
2. Subject to the
provisions of paragraph 3, where an enterprise of a Contracting State carries
on business in the other Contracting State through a permanent establishment
situated therein, there shall in each Contracting State be attributed to that
permanent establishment the profits which it might be expected to make if it
were a distinct and separate enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment.
3. In determining the
profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere.
4. In so far as it has
been customary in a Contracting State to determine the profits to be attributed
to a permanent establishment on the basis of an apportionment of the total
profits of the enterprise to its various parts, nothing in paragraph 2 shall
preclude that Contracting State from determining the profits to be taxed by
such an apportionment as may be customary; the methods of apportionment adopted
shall, however, be such that the result shall be in accordance with the
principles contained in this Article.
5. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by the
permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of the
preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.
7. Where profits include
items of income which are dealt with separately in other Articles of this
agreement, then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Shipping.--1.
Profits derived by an enterprise of a Contracting State from the operation by
that enterprise of ships in international traffic shall be taxable only in that
State.
2. For the purposes of
this Article, profits from the operation of ships in international traffic
shall mean profits derived by an enterprise described in paragraph 1 from the
transportation by sea of passengers, mail, livestock or goods and shall
include:
(a) the charter or rental of ships incidental to such
transportation;
(b) the rental of containers and related equipments used in
connection with the operation of ships in international traffic;
(c) the gains derived from the alienation of ships, containers
and related equipments owned and operated by the enterprise in international
traffic.
3. For the purposes of
this Article, interest on funds connected with the operation of ships in
international traffic shall be regarded as profits derived from the operation
of such ships and the provisions of Article 11 shall not apply in relation to
such interest.
4. The provisions of
paragraphs 1, 2 and 3 shall apply to profits from the participation in a pool,
a joint business or an international operating agency.
ARTICLE 9: Associated
Enterprises.--Where:
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State, or
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
ARTICLE 10: Dividends.--1.
Dividends paid by a company which is a resident of a Contracting State to a
resident of the other Contracting State may be taxed in that other State.
2. However, such dividends
may also be taxed in the Contracting State of which the company paying the
dividends is a resident and according to the laws of that State, but if the
recipient is the beneficial owner of the dividends, the tax so charged shall
not exceed:
(a) 5 per cent of the gross amount of the dividends if the beneficial
owner is a company which owns at least ten per cent of the shares of the
company paying the dividend;
(b) 15 per cent of the gross amount of the dividends in all other
cases.
3. The term
"dividends" as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident.
4. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other
Contracting State of which the company paying the dividends is a resident,
through a permanent establishment situated therein or performs in that other
State independent personal services from a fixed base situated therein, and the
holding in respect of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such a case, the provisions
of Article 7 or Article 14, as the case may be, shall apply.
5. Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company except insofar as such dividends are paid to a resident of
that other State or insofar as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment or a fixed
base situated in that other State, nor subject the company's undistributed
profits to a tax on the company's undistributed profits, even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income
arising in such other State.
ARTICLE 11: Interest.--1.
Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest
may be taxed in the Contracting State in which it arises and according to the
laws of that State, but if the recipient is the beneficial owner of the
interest, the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the interest, if such
interest is paid on a loan granted by a bank carrying on a bona fide banking
business or by a similar financial institution; and
(b) 12.5 per cent of the gross amount of the interest in all
other cases.
3. Notwithstanding the
provisions of paragraph 2 interest arising in a Contracting State shall be
exempt from tax in that State provided it is derived and beneficially owned by:
(i) the Government, a political sub-division or a local
authority of the other Contracting State; or
(ii) the Central Bank of the other
Contracting State.
4. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor's profits, and in particular, income from
Government securities and income from bonds or debentures including premiums
and prizes attaching to such securities, bonds or debentures. Penalty charges
for late payment shall not be regarded as interest for the purpose of this
Article.
5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent
establishment situated therein or performs in that other State independent
personal services from a fixed base situated therein, and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 14, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that Contracting State
itself, a political sub-division, a local authority or a resident of that
State. Where, however, the person paying the interest, whether he is a resident
of a Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the indebtedness on
which the interest is paid was incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is
situated.
7. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this agreement.
ARTICLE 12: Royalties.--1.
Royalties arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such royalties
may also be taxed in the Contracting State in which they arise and according to
the laws of that State, but if the recipient is the beneficial owner of the
royalties the tax so charged shall not exceed 10 per cent of the gross amount
of such royalties.
3. The term
"royalties" as used in this Article means payment of any kind
received as a consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work, including cinematography films, or
films or tapes used for radio or television broadcasting, any patent, trade
mark, design or model, plan, secret formula or process, or for the use of, or
the right to use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific experience but do
not include royalties or other payments in respect of the operation of mines or
quarries or exploitation of petroleum or other natural resources.
4. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the royalties arise, through a permanent
establishment situated therein or performs in that other State independent
personal services from a fixed base situated therein and the right or property
in respect of which the royalties are paid is effectively connected with such
permanent establishment or fixed base. In such a case, the provisions of
Article 7 or Article 14, as the case may be, shall apply.
5. Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the liability to pay the royalties was
incurred, and such royalties are borne by such permanent establishment or fixed
base, then such royalties shall be deemed to arise in the Contracting State in
which the permanent establishment or fixed base is situated.
6. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties, having regard to
the use, right or information for which they are paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the
absence of such relationship, the provisions of this Article shall apply only
to the last mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this agreement.
ARTICLE 13: Capital
Gains.--1. Gains derived by a resident of a Contracting State from the
alienation of immovable property referred to in paragraph 2 of Article 6 and
situated in the other Contracting State may be taxed in that other State.
2. Gains from the
alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or together
with the whole enterprise) or of such fixed base may be taxed in that other
State.
3. Gains from the
alienation of any property other than that mentioned in paragraphs 1 and 2
shall be taxable only in the Contracting State of which the alienator is a
resident.
ARTICLE 14: Independent
Personal Services.--1. Income derived by a resident of a Contracting State in
respect of professional services or other independent activities of a similar
character shall be taxable only in that State, except in the following
circumstances when such income may also be taxed in the other Contracting
State:
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities; in that
case, only so much of the income as is attributable to that fixed base may be
taxed in that other Contracting State; or
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days in the relevant
"previous year" or 'year of income", as the case may be; in that
case only so much of the income as is derived from his activities performed in
that other State may be taxed in that other State.
2. The term
"professional services" includes independent scientific, literary,
artistic, educational or teaching activities as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants.
ARTICLE 15: Dependent
Personal Services.--1. Subject to the provisions of Articles 16, 17, 18, 19, 20
and 21, salaries, wages and other similar remuneration derived by a resident of
a Contracting State in respect of an employment shall be taxable only in that
State unless the employment is exercised in the other Contracting State. If the
employment is so exercised, such remuneration as is derived therefrom may be
taxed in that other State.
2. Notwithstanding the
provisions of paragraph 1, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State, if:
(a) the recipient is present in the other State for a period or
periods not exceeding in the aggregate 183 days in the relevant "previous
year" or "year of income", as the case may be; and
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the other State; and
(c) the remuneration is not borne by a permanent establishment or
a fixed base which the employer has in the other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State shall be taxable only in that
State.
ARTICLE 16: Directors'
Fees.--Directors' fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE 17: Income Earned
by Entertainers and Athletes.--1. Notwithstanding the provisions of Articles 14
and 15, income derived by a resident of a Contracting State as an entertainer
such as a theatre, motion picture, radio or television artiste or a musician or
as an athlete, from his personal activities as such exercised in the other
Contracting State may be taxed in that other State.
2. Where income in respect
of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or an athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised.
3. Notwithstanding the
provisions of paragraph 1, income derived by an entertainer or an athlete who
is a resident of a Contracting State from his personal activities as such
exercised in the other Contracting State, shall be taxable only in the
first-mentioned Contracting State, if the activities in the other Contracting
State are supported wholly or substantially from the public funds of the first-mentioned
Contracting State, including any of its political sub-divisions or local
authorities.
4. Notwithstanding the
provisions of paragraph 2 and Articles 7, 14 and 15, where income in respect of
personal activities exercised by an entertainer or an athlete in his capacity
as such in a Contracting State accrues not to the entertainer or athlete himself but to another person, that income
shall be taxable only in the other Contracting State, if that other person is
supported wholly or substantially from the public funds of that other State,
including any of its political sub-divisions or local authorities.
ARTICLE 18: Remuneration
and Pensions in Respect of Government Service.--1. (a) Remuneration, other than
a pension, paid by a Contracting State or a political sub-division or a local
authority thereof to an individual in respect of services rendered to that
State or sub-division or authority shall be taxable only in that State.
(b) However, such
remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of
that State who:
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension paid
by, or out of funds created by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However, such pension
shall be taxable only in the other Contracting State, if the individual is a
resident of, and a national of that other State.
3. The provisions of
Articles 15, 16 and 17 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 19: Non-Government
Pensions and Annuities.--1. Any pension, other than a pension referred to in
Article 18, or any annuity derived by a resident of a Contracting State from
sources within the other Contracting State may be taxed only in the
first-mentioned Contracting State.
2. The term
"pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of
performance of services.
3. The term
"annuity" means a stated sum payable periodically at stated times
during life or during a specified or ascertainable period of time, under an
obligation to make the payments in return for adequate and full consideration
in money or money's worth.
ARTICLE 20: Students,
Trainees and Apprentices.--1. An individual who is a resident of a Contracting
State and who is temporarily present in the other Contracting State solely as a
student at a recognised university, college, school or other educational
institution in that other Contracting State or as a business or technical
apprentice therein, for a period not exceeding six years from the date of his
first arrival in that other Contracting State in connection with that visit,
shall be exempt from tax in that other Contracting State on--
(a) all remittances from the first-mentioned Contracting State
for the purposes of his maintenance, education or training; and
(b) any remuneration (not exceeding 20,000 Indian rupees or its
equivalent sum in U.A.E. currency per annum) for personal services rendered in
that other Contracting State with a view to supplementing the resources
available to him for such purposes.
2. An individual who is a
resident of a Contracting State and who is temporarily present in the other
Contracting State for the purpose of study, research or training solely as a
recipient of a grant, allowance or award from the Government of either of the
Contracting States or from a scientific, educational, religious or charitable
organisation or under a technical assistance programme entered into by the
Government of either of the Contracting States for a period not exceeding three
years from the date of his first arrival
in that other Contracting State in connection with that visit shall be exempt
from tax in that other Contracting State on--
(a) the amount of such grant, allowance or award;
(b) all remittances from the first-mentioned Contracting State
for the purposes of his maintenance, education or training; and
(c) any remuneration (not exceeding 20,000 Indian rupees or its
equivalent sum in U.A.E. currency per annum) in respect of services in that
other Contracting State if the services are performed in connection with his
study, research, training or are incidental thereto.
3. An individual who is a
resident of a Contracting State and who is temporarily present in the other
Contracting State solely as an employee of, or under contract with, an
enterprise of the first-mentioned Contracting State solely for the purpose of
acquiring technical, professional or business experience from a person other
than such enterprise, for a period not exceeding twelve months from the date of
his first arrival in that other Contracting State in connection with that visit
shall be exempt from tax in that other Contracting State on--
(a) all remittances from the first-mentioned Contracting State
for the purposes of his maintenance, education or training; and
(b) any remuneration, so far as it is not in excess of 20,000
Indian rupees or its equivalent sum in U.A.E. currency per annum, for personal
services rendered in that other Contracting State, provided such services are
in connection with the acquisition of such experience.
4. An individual who is a
resident of a Contracting State and who is temporarily present in the other
Contracting State under arrangements with the Government of that other
Contracting State solely for the purpose of training or study shall be exempt
from tax in that other Contracting State in respect of remuneration received by
him on account of such training or study.
5. For the purposes of
this Article and Article 21,
(a) (i) an
individual shall be deemed to be a resident of India if he is resident in India
in the "previous year" in which he visits U.A.E. or in the
immediately preceding "previous year";
(ii) an
individual shall be deemed to be a resident of U.A.E. if, immediately before
visiting India, he is a resident of U.A.E.;
(b) the term "recognised" in relation to a university,
college, school or other educational institution in a Contracting State shall,
in the case of doubt, be determined by the competent authority of that State.
ARTICLE 21: Professors,
Teachers and Researchers.--1. An individual who is a resident of a Contracting
State immediately before making a visit to the other Contracting State, and
who, at the invitation of any university, college, school or other similar
educational institution, which is recognised by the Government, a political
sub-division or a local or statutory authority of that State, visits that other
Contracting State for a period not exceeding two years solely for the purpose
of teaching or research or both at such educational institution, shall be
exempt from tax in that other Contracting State on his remuneration for such
teaching or research.
2. This Article shall not
apply to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.
ARTICLE 22: Other
Income.--1. Subject to the provisions of paragraph 2, items of income of a
resident of a Contracting State, wherever arising, which are not expressly
dealt with in the foregoing articles of this agreement, shall be taxable only
in that Contracting State.
2. The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such
income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right or property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such case, the provisions of Article 7 or Article 14, as the case may be,
shall apply.
ARTICLE 23: Capital.--1.
Capital represented by immovable property referred to in Article 6, owned by a
resident of a Contracting State and situated in the other Contracting State,
may be taxed in that State.
2. Capital represented by
movable property forming part of the business property of a permanent
establishment which an enterprise of a Contracting State has in the other
Contracting State, or by movable property pertaining to a fixed base available
to a resident of a Contracting State in the other Contracting State for the
purpose of performing independent personal services, may be taxed in that other
State.
3. Capital represented by
ships operated in international traffic and by movable property pertaining to
the operation of such ships, shall be taxable only in the Contracting State in
which the place of effective management of the enterprise is situated.
ARTICLE 24: Income of
Government and Institutions.--1. The Government of one of the Contracting States shall be exempt from tax in the other
Contracting State in respect of any income derived by such Government from that
other Contracting State.
2. For the purposes of
paragraph 1 of this Article, the term "Government"--
(a) in the case of India, means the Government of India, and
shall include:
(i) the political sub-divisions, the local
authorities, the local administrations, and the local Governments;
(ii) the
Reserve Bank of India;
(iii) any such institution or body as may be
agreed from time to time between the two Contracting States;
(b) in the case of U.A.E. means the Government of the United Arab
Emirates, and shall include:
(i) the political sub-divisions, the local
authorities, the local administrations and the local Governments;
(ii) the Central Bank of the United Arab
Emirates, Abu Dhabi Investment Authority and Abu Dhabi Fund for Economic
Development;
(iii) any such institution or body as may be
agreed from time to time between the two Contracting States.
ARTICLE 25: Elimination of
Double Taxation.--1. The laws in force in either of the Contracting States
shall continue to govern the taxation of income and capital in the respective
Contracting States except where express provisions to the contrary are made in
this agreement.
2. Where a resident of
India derives income or owns capital which, in accordance with the provisions
of this agreement, may be taxed in U.A.E., India shall allow as a deduction from
the tax on the income of that resident an amount equal to the income-tax paid
in U.A.E. whether directly or by deduction; and as a deduction from the tax on
the capital of that resident an amount equal to the capital tax paid in U.A.E.
Such deduction in either case shall not, however, exceed that part of the
income-tax or capital-tax (as computed before the deduction is given) which is
attributable, as the case may be, to the income or the capital which may be
taxed in U.A.E. Further, when such resident is a company by which surtax is
payable in India, the deduction in respect of income-tax paid in U.A.E. shall
be allowed in the first instance from income-tax payable by the company in
India and as to the balance, if any, from the surtax payable by it in India.
3. Subject to the laws of
the U.A.E. where a resident of the U.A.E. derives income which in accordance
with the provisions of this agreement may be taxed in India, the U.A.E. shall
allow as a deduction from the tax on income of that person an amount equal to
the tax on income paid in India. Such deduction shall not, however, exceed that
part of income-tax as computed before the deduction is given, which is
attributable to the income which may be taxed in the U.A.E.
4. For the purpose of
paragraph 3, the term "tax paid in India" shall be deemed to include
the amount of Indian tax which would have been paid if the Indian tax had not
been exempted or reduced in accordance with the special incentive measures
under the provisions of the Income-tax Act, 1961, which are designed to promote
economic development in India, effective on the date of signature of this
agreement, or which may be introduced in the future in modification of, or in
addition to, the existing provisions for promoting economic development in
India, and such other incentive measures which may be agreed upon from time to time by the Contracting States.
5. Where, in accordance
with any provision of the agreement, income derived or capital owned by a
resident of a Contracting State is exempt from tax in that State, such State
may, nevertheless, in calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted income or capital.
ARTICLE 26:
Non-Discrimination.--1. The nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which nationals of that other State in the same circumstances
and under the same conditions are or may be subjected.
2. The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other
Contracting State than the taxation levied on enterprises of that Contracting
State carrying on the same activities in the same circumstances or under the
same conditions.
3. The provisions of this
Article shall not be construed as obliging a Contracting State to grant to residents
of the other Contracting State any personal allowances, reliefs and reductions
for taxation purposes on account of civil status or family responsibilities
which it grants to its own residents.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or controlled
directly or indirectly, by one or more residents of the other Contracting
State, shall not be subjected in the first-mentioned Contracting State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which other similar
enterprises of that first-mentioned State are or may be subjected in the same
circumstances and under the same conditions.
5. In this Article, the
term "taxation" means taxes which are the subject of this agreement.
ARTICLE 27: Mutual
Agreement Procedure.--1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
him in taxation not in accordance with this agreement, he may, notwithstanding
the remedies provided by the national laws of those States, present his case to
the competent authority of the Contracting State of which he is a resident.
This case must be presented within two years of the date of receipt of notice
of the action which gives rise to taxation not in accordance with the
agreement.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to avoidance of taxation not in accordance with the agreement. Any
agreement reached shall be implemented notwithstanding any time limits in the
national laws of the Contracting States.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the agreement. When it seems advisable in order to reach
agreement to have an oral exchange of opinion, such exchange may take place
through a commission consisting of representatives of the competent authorities
of the Contracting States. They may also consult together for the elimination
of double taxation in cases not provided for in the agreement.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of applying this agreement.
ARTICLE 28: Exchange of
Information.--1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out the provisions of
the agreement or for the prevention or detection of evasion of taxes which are
the subject of this agreement. Any information so exchanged shall be treated as
secret but may be disclosed only to persons (including a court or
administrative body) concerned with the assessment, collection, enforcement,
investigation or prosecution in respect of the taxes which are the subject of
this agreement, or to persons with respect to whom the information relates.
2. The exchange of
information may also be on request with reference to particular cases.
3. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:
(a) to carry out administrative measures at variance with the
laws or administrative practice of that or of the other Contracting State;
(b) to supply information or documents which are not obtainable
under the laws or in the normal course of the administration of that or of the
other Contracting State;
(c) to supply information of documents which would disclose any
trade, business, industrial, commercial or professional secret or trade process
or information the disclosure of which would be contrary to public policy
(order public).
ARTICLE 29: Diplomatic and
Consular Activities.--Nothing in this agreement shall affect the fiscal
privileges of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreements.
ARTICLE 30: Entry into
Force.--1. Each of the Contracting States shall notify to the other the
completion of the proceedings required by its law for the bringing into force
of this agreement. The agreement shall enter into force on the date of the
later of these notifications and shall thereupon have effect--
(a) in the United Arab Emirates:
in respect of income
derived on or after the 1st January next following the calendar year in which
the agreement enters into force and in respect of capital which is held at the
expiry of the calendar year next following that in which the agreement enters
into force or subsequent years;
(b) in India:
in respect of income
arising in any "previous year" beginning on or after 1st April next
following the calendar year in which the agreement enters into force and in
respect of capital which is held at the expiry of any "previous year"
beginning on or after 1st April next following the calendar year in which the
agreement enters into force.
ARTICLE 31:
Termination.--This agreement shall remain in force indefinitely, but either of
the Contracting States may, on or before 30th June in any calendar year
beginning after the expiration of a period of five years from the date of its
entry into force, give to the other Contracting State, through diplomatic
channels, written notice of termination. In such event, the agreement shall
cease to have effect--
(a) in the United Arab Emirates:
in respect of income
derived on or after 1st January next following the calendar year in which the
notice of termination is given and in respect of capital which is held at the
expiry of the calendar year next following that in which the notice of
termination is given or subsequent years;
(b) in India:
in respect of income
arising in any "previous year" beginning on or after 1st April next
following the calendar year in which the notice of termination is given and in
respect of capital which is held at the expiry of any "previous year"
beginning on or after 1st April next following the calendar year in which the
notice of termination is given.
In witness whereof, the
undersigned, being duly authorised thereto, have signed this agreement.
Done in two originals at
New Delhi on this Wednesday, 29th day of April, One Thousand Nine Hundred and
Ninety-Two corresponding to the 27th day of Shawwal 1412H in the Hindi, Arabic
and English languages, all texts being equally authentic. In case of divergence
amongst the texts, the English text shall be the operative one.
For the Government of the
Republic of India For the
Government of the United Arab Emirates
(Sd.) Dr.
Manmohan Singh, Minister of Finance. (Sd.) Hamdan Bin Rashid Al
Maktoum, Minister of Finance and Industry
At the signing today of
the agreement between the Government of the Republic of India and the
Government of the United Arab Emirates for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to taxes on income and on
capital, the undersigned have agreed upon the following provisions which shall
form an integral part of this agreement:
(i) Subject to the provisions of Article 5, nothing in this
agreement shall affect the right of the Government of the United Arab Emirates,
its political sub-divisions, local authorities or local Governments to apply
its own laws related to the taxation of income derived from the petroleum and
natural resources; such activities will be taxed according to the laws of the
United Arab Emirates;
(ii) Notwithstanding the provisions of
Article 6 and Article 23, the residential property owned by a national of a
Contracting State and occupied for self-residence in the other Contracting
State shall be exempt in the other Contracting State from the taxes covered by
this agreement.
In witness whereof, the
undersigned, being duly authorised thereto, have signed this Protocol.
Done in two originals at
New Delhi on this Wednesday, 29th day of April, One Thousand Nine Hundred and
Ninety-Two corresponding to the 27th day of Shawwal 1412H in the Hindi, Arabic
and English languages, all texts being equally authentic. In case of divergence
amongst the texts, the English text shall be the operative one.
For the Government of the
Republic of India
For the Government of the
United
Arab Emirates
(Sd.) Dr.
Manmohan Singh, Minister of Finance
(Sd.) Hamdan Bin Rashid
AlMaktoum, Minister of Finance and Industry.
(Sd.) V. B. Srinivasan,
Joint Secretary to the
Government of India.
Agreement between the
Government of the Republic of India and the Government of the United Arab
Emirates for the avoidance of double taxation of income derived from
international air transport
Notification No. 8490 [F.
No. 501/1/88-FTD], dated 8 November, 1989
G.S.R. 969(E).--Whereas
the annexed agreement between the Government of the Republic of India and the
Government of the United Arab Emirates for the avoidance of double taxation of
income derived from international air transport will enter into force on
December 1, 1989, on the notification by both the Contracting States to each
other of the completion of the procedures required by their respective laws, as
required by Article 6 of the said agreement;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that all the provisions of the
said Agreement shall be given effect to in the Union of India.
The Government of the
Republic of India and the Government of the United Arab Emirates,
Desiring to conclude an
agreement for the avoidance of double taxation of income derived from
international air transport,
Have agreed as follows:
ARTICLE 1: Taxes
covered.--1. The taxes to which this Agreement shall apply are:
(a) In the case of the United Arab Emirates, the income-tax as
imposed by the Federal Government of the United Arab Emirates (hereinafter
referred to as "United Arab Emirates tax").
(b) In the case of India:
(i) the income-tax including any surcharge thereon; and
(ii) the
surtax (hereinafter referred to as "Indian tax").
2. This Agreement shall
also apply to any identical or substantially similar taxes on income which are
imposed at federal or state level by either Contracting State in addition to,
or in place of, the taxes referred to in paragraph 1 of this article. The
competent authorities of the Contracting States shall notify each other of any
substantial changes which are made in their respective taxation laws.
ARTICLE 2:
Definitions.--1. For the purpose of this Agreement, unless the context
otherwise requires.--
(a) the terms "a Contracting
State" and "the other Contracting State" mean the United Arab
Emirates or India as the context requires;
(b) the term
"tax" means United Arab Emirates tax or Indian tax as the context
requires;
(c) the term "enterprise of India"
means Air India and Indian Airlines and any other enterprises designated by the
Government of India;
(d) the term "enterprise of the United
Arab Emirates" means Gulf Air and Emirates Airlines and any other
enterprises designated by the Government of the United Arab Emirates;
(e) the term "international
traffic" means any transport by an aircraft operated by an enterprise of a
Contracting State, except when the aircraft is operated solely between places
in the other Contracting State;
(f) the expression "operation of
aircraft" means business of carriage by air of passengers, livestock,
goods or mail carried on by the owners or lessees or charterers of aircraft
including the sale of tickets for such transportation on behalf of other
enterprises, the incidental lease of aircraft and any other activity directly
connected with such transportation; and
(g) The term "competent authority" means:
(i) in the case of India, the Central
Government in the Ministry of Finance (Department of Revenue), or its
authorised representative;
(ii) in the case of the United Arab Emirates,
the Minister of Finance and Industry or his authorised representative.
2. In the application of
the provisions of this Agreement by one of the Contracting States any term not
defined herein shall, unless the context otherwise requires, have the meaning
which it has under the laws in force in that State relating to the taxes which
are the subject of this Agreement.
ARTICLE 3: Avoidance of
double taxation.--1. Income which an enterprise of the United Arab Emirates
derives from the operation of aircraft in international traffic shall be
exempted in India from Indian tax.
2. Income which an enterprise
of India derives from the operation of aircraft in international traffic shall
be exempted in the United Arab Emirates from United Arab Emirates tax.
3. The provisions of
paragraphs 1 and 2 shall also apply to income from the participation in a pool,
a joint business or an international operating agency.
4. For the purpose of
paragraphs 1 and 2, interest on funds directly connected with the operation of
aircraft in international traffic shall be regarded as income from the
operation of such aircraft.
5. Gains derived by an
enterprise of a Contracting State from the alienation of aircraft owned and
operated by the enterprise including gains from the alienation of spares and
equipment used by the enterprise in the operation of such aircraft shall be taxable
only in that State.
6. Salaries, wages and
other remuneration in respect of an employment exercised aboard an aircraft
operated in international traffic shall be taxable only in the Contracting
State where the air transport enterprise is managed and controlled, provided
that the employee concerned is not a resident in the other Contracting State in
accordance with the tax laws of that other State.
ARTICLE 4: Residual
provisions.--The laws in force in either of the Contracting States will
continue to govern the assessment and taxation of income in the Contracting
States except where express provision to the contrary is made in this
Agreement.
ARTICLE 5: Mutual
agreement procedure.--1. The competent authorities of the Contracting States
shall endeavour to resolve by mutual agreement any difficulties or doubts
arising as to the interpretation or application of the Agreement.
2. Consultation may be
requested at any time by the competent authority of a Contracting State for the
purpose of application or interpretation of the article. Such consultation
shall begin within 90 days from the date of receipt of any such request and
decisions shall be by mutual consent.
ARTICLE 6: Entry into
force.--1. Each State shall notify to the other the completion of the procedure
required by its law for the bringing into force of this Agreement. The
Agreement shall enter into force on the first day of the second month following
the month in which the latter of these notifications has been given.
2. The provisions of this
Agreement shall have effect in respect of income derived on or after the 1st
day of January, 1971.
3. No action would be
taken to reopen assessments in respect of the period prior to the 1st day of
January, 1971.
4. In case a Contracting
State collects taxes relating to the above-mentioned period, on income derived
from the operation of aircraft by an enterprise of the other Contracting State,
then such taxes shall be refunded together with interest if any, in accordance
with the laws of the first-mentioned Contracting State.
ARTICLE 7:
Termination.--This Agreement shall continue in effect indefinitely but either
Contracting State may, on or before the thirtieth day of June in any calendar
year after the year 1993, give notice of termination to the other Contracting
State and in such event this Agreement shall cease to be effective:
(a) in the United Arab Emirates in respect of any tax year
commencing on or after the 1st day of January of the second calendar year
following the year in which the notice is given;
(b) in India in respect of any assessment year commencing on or
after the 1st day of April, of the second calendar year following the year in
which the notice is given.
It witness whereof, the
undersigned, duly authorised thereto have signed this Agreement.
Done at New Delhi this
third day of March, one thousand nine hundred and eighty-nine in two originals
in the Hindi, Arabic and English languages, all texts being equally authentic.
In case of dispute as to interpretation and application of this Agreement, the
English text shall prevail.
For the Government of the For
the Government of the
Republic of India, United
Arab Emirates,
(Sd.) P. K. Appachoo, (Sd.)
Mohamed Khalfan Khirbash,
Joint Secretary to the
Government of India, Director
of Investment Department,
Ministry of Finance. Ministry
of Finance and Industry.
Convention between the
Government of India and the Government of the United Arab Republic for the
avoidance of double taxation with respect to taxes on income
Notification No. 128 [F.
No. 11(29)-63/TPL], dated 30 September, 1969
G.S.R. 2363.--Whereas the
annexed Convention between the Government of India and the Government of the
United Arab Republic for the avoidance of double taxation with respect to taxes
on income has been ratified and the instruments of ratification exchanged, as
required by Article 29 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that all the provisions of the
said Convention shall be given effect to in the Union of India.
The Government of India
and the Government of the United Arab Republic,
Desiring to conclude a
Convention for the avoidance of double taxation with respect to taxes on
income,
Have agreed as follows:
ARTICLE I: Personal
scope.--This Convention shall apply to persons who are residents of one or both
of the Contracting States.
ARTICLE II: Taxes
covered.--1. This Convention shall apply to taxes on income imposed on behalf
of each Contracting State or of its political sub-divisions or local
authorities, where they have the authority, irrespective of the manner in which
they are levied.
2. There shall be regarded
as taxes on income all taxes imposed on total income or on all elements of
income including taxes on gains from the sale, exchange or transfer of movable
or immovable property and taxes on the total amounts of wages or salaries paid
by enterprises.
3. The existing taxes to
which the Convention shall apply, are, in particular:
(a) in the case of India:
(1) the income-tax, including super tax and the surcharge imposed
under the Income-tax Act, 1961 (43 of 1961); and
(2) the surtax imposed under the Companies (Profits) Surtax Act,
1964 (7 of 1964);
(hereinafter referred to
as "Indian tax").
(b) In the case of the United Arab Republic:
(1) tax on income derived from immovable
property (including the land tax, the buildings tax and the ghaffir tax);
(2) tax on
income from movable capital;
(3) tax on
commercial and industrial profits;
(4) tax on wages, salaries, indemnities and
pensions (as mentioned in Book III of Law (14 of 1939);
(5) tax on
profits from liberal professions and all other non-commercial professions;
(6) general
income-tax;
(7) defence
tax (imposed on income);
(8) national
security tax (imposed on income); and
(9) supplementary taxes imposed as percentage of taxes mentioned
above;
(hereinafter referred to
as "United Arab Republic tax").
4. The Convention shall
also apply to any identical or substantially similar taxes which are
subsequently imposed in addition to, or in the place of, the existing taxes.
5. At the end of each
year, the competent authority of the Contracting States shall notify to each
other any significant changes which have been made in their respective taxation
laws.
CHAPTER II
Definitions
ARTICLE III: General
definitions.--1. In this Convention, unless the context otherwise requires.--
(a) the term "India" shall have
the meaning assigned to it in Article I of the Constitution of India;
(b) the term
"United Arab Republic" means Egypt;
(c) the terms "a Contracting
State" and "the other Contracting State" mean India or the
United Arab Republic, as the context requires;
(d) the term
"tax" means Indian tax or United Arab Republic tax, as the context
requires;
(e) the term "person" includes
individuals, companies and all other entities which are treated as taxable
units under the tax laws in force in either Contracting State;
(f) the term "company" for tax
purposes means any entity which is treated as a company under the Indian tax
law or any entity which is treated as a body corporate under the United Arab
Republic tax law;
(g) the terms "enterprise of a
Contracting State" and "enterprise of the other Contracting
State" mean, respectively, an enterprise carried on by a resident of a
Contracting State and an enterprise carried on by a resident of the other
Contracting State;
(h) the term "competent authority"
means in the case of India, the Central Government in the Ministry of Finance
(Department of Revenue and Insurance); and in the case of the United Arab
Republic, the Minister of Treasury or his authorised representative.
2. In the application of
the provisions of this Convention by one of the Contracting States any term not
otherwise defined shall, unless the context otherwise requires, have the
meaning which it has under the laws in force in that State relating to the
taxes which are the subject of this Convention.
ARTICLE IV: Fiscal
domicile.--1. For the purposes of this Convention the term "resident of a
Contracting State" means any person who under the law of the State, is resident
of that State for the purposes of taxation therein by reason of his domicile,
residence, place of management or any other criterion applied under the tax
laws of that State.
2. Where by reason of the
provisions of paragraph 1, an individual is a resident of both Contracting
States, then his case shall be determined in accordance with the following
rules:
(a) he shall be deemed to be a resident of the Contracting State
in which he has a permanent home available to him. If he has permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the Contracting State with which his personal and economic
relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent home available to
him in either Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in
neither of them, he shall be deemed to be a resident of the Contracting State
of which he is a national; and
(d) if he is a national of both Contracting States or if neither
of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the
Contracting State in which its place of effective management is situated.
ARTICLE V: Permanent
establishment.--1. For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business in which
the business of the enterprise is wholly or partly carried on.
2. The term
"permanent establishment" shall include:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop or a warehouse;
(f) a mine, a
quarry, an oil field or other place of extraction of natural resources;
(g) a
permanent sales exhibition; and
(h) a
building site or construction or assembly project which exists for more than
ninety days.
3. The term
"permanent establishment" shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage or
display of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage or display;
(c) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise or for collecting information, for
the enterprise; and
(d) the maintenance of fixed place of business solely for the
purpose of advertising or for scientific research, for the enterprise.
4. A person acting in one
of the Contracting States for or on behalf of an enterprise of the other
Contracting State shall be deemed to be a permanent establishment of that
enterprise in the first-mentioned State if:
(i) he has and habitually exercises in that State a general
authority to negotiate and enter into contracts for or on behalf of the
enterprise, unless the activities of the person are limited to the purchase of
goods or merchandise for the enterprise, or
(ii) he habitually maintains in the
first-mentioned Contracting State a stock of goods or merchandise belonging to
the enterprise from which the person regularly delivers goods or merchandise
for or on behalf of the enterprise, or
(iii) he habitually secures orders in the
first-mentioned Contracting State exclusively or almost exclusively, for the
enterprise itself or for the enterprise and other enterprises which are
controlled by it or have a controlling interest in it.
5. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker of a genuinely independent status.
6. The fact that a
company, which is a resident of one of the Contracting States, has a subsidiary
company which either is a resident of the other Contracting State or carries on
a trade or business in that other Contracting State (whether through a
permanent establishment or otherwise) shall not, of itself, constitute that
subsidiary company a permanent establishment of its parent company.
CHAPTER III
Taxation of income
ARTICLE VI: Income from
immovable property.--1. Income from immovable property shall be taxable only in
the Contracting State in which such property is situated.
2. The term
"immovable property" shall be defined in accordance with the law and
usage of the Contracting State in which the property in question is situated.
The term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships and aircraft shall not be regarded as immovable
property.
3. The provisions of
paragraph 1 shall apply to income derived from the direct use, letting, or use
in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
professional services.
ARTICLE VII: Business
profits.--1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only so much of them as is attributable to
that permanent establishment.
2. Where an enterprise of
a Contracting State carries on business in the other Contracting State though a
permanent establishment situated therein, there shall in each Contracting State
be attributed to that permanent establishment that profits which it might be
expected to make if it were a distinct and separate enterprise engaged in the
same or similar activities under the same or similar conditions and dealing
wholly independently with the enterprise of which it is a permanent
establishment.
3. In the determination of
the profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purpose of the permanent establishment
including executive and general administrative expenses so incurred, whether in
the State in which the permanent establishment is situated or elsewhere.
4. Insofar as it has been
customary in a Contracting State to determine the profits to be attributed to a
permanent establishment on the basis of an apportionment of the total profits
of the enterprise to its various parts, nothing in paragraph 2 shall preclude
that Contracting State from determining the profits to be taxed by such an apportionment
as may be customary; the method of apportionment adopted shall, however, be
such that the result shall be in accordance with the principles laid down in
this article.
5. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the purpose of export to
the enterprise of which it is the permanent establishment.
6. Where profits include
items of income which are dealt with separately in other Articles of this
Convention, then the provisions of those articles shall not be affected by the
provisions of the present article.
ARTICLE VIII: Air
transport.--1. Income derived from the operation of aircraft by an enterprise
of one of the Contracting States shall not be taxed in the other Contracting
State unless the aircraft is operated wholly or mainly between places within
that other Contracting State.
2. Paragraph 1 shall
likewise apply in respect of participations in pools of any kind by enterprises
engaged in air transport.
ARTICLE IX:
Shipping.--Income derived from the operation of ships by an enterprise of one
of the Contracting States shall not be taxed in the other Contracting State
unless the ships are operated wholly or mainly between places within that other
Contracting State.
ARTICLE X: Associated
enterprises.--1. Where--
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State, or
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises then any profits which would, but for those conditions,
have accrued to one of the enterprises, but, by reason of those conditions,
have not so accrued, may be included in the profits of that enterprise and
taxed accordingly.
2. If the information
available to the taxation authority concerned is inadequate to determine, for
the purposes of paragraph 1 of this article, the profits which might be expected
to accrue to an enterprise, nothing in that paragraph shall affect the
application of the law of either Contracting State in relation to the liability
of that enterprise to pay tax on an amount determined by the exercise of a
discretion or the making of an estimate by the taxation authority of that
State:
Provided that such
discretion shall be exercised or such estimate shall be made, so far as the
information available to the taxation authority permits, in accordance with the
principle stated in that paragraph;
Provided further that the
amount so determined or the estimate so made may be amended or revised when
adequate information is furnished to the taxation authority concerned.
ARTICLE XI: Dividends.--1.
Dividends paid by a company which is a resident of India to a resident of the
United Arab Republic may be taxed in India.
2. Dividends paid by a
company which is a resident of the United Arab Republic to a resident of India
may be taxed in the United Arab Republic. But such dividends shall only be
subject to the tax on income derived from movable capital, the defence tax, the
national security tax and the supplementary taxes (which taxes shall be
deducted at the source). If paid to a natural person, the general income-tax
levied on the net total income may also be imposed. Dividends paid shall be
deducted from the amount of the distributing company's taxable income or
profits subject to the tax chargeable in respect of its industrial and
commercial profits if such dividends are distributed out of the taxable profits
of the same taxable year but not distributed out of accumulated reserves or
other assets.
3. Dividends paid by a
company which is a resident of India whose activities lie solely or mainly in
the United Arab Republic shall, in the United Arab Republic, be treated as
mentioned in paragraph 2 of this article when such dividends are distributed in
the United Arab Republic.
4. Dividends paid by a
company which is a resident of the United Arab Republic whose activities lie
solely or mainly in India shall, in India, be treated as mentioned in paragraph
1 of this article when such dividends are distributed in India.
5. Dividends, deemed under
Article 11 of United Arab Republic Law 14 of 1939 to be paid out of the yearly
profits of a permanent establishment maintained in the United Arab Republic by
an Indian company whose activities extend to countries other than the United
Arab Republic shall, in the United Arab Republic, be treated as mentioned in
paragraph 2 of this article.
The permanent
establishment shall be considered to have distributed as dividends in the
United Arab Republic within 60 days from the closing of its financial year, an
amount equivalent to 90 per cent of its total net profits liable to the tax on
industrial and commercial profits without applying the provisions of Article 36
of Law 14 of 1939, provided that the remaining 10 per cent of the net profits
shall be set aside to form a special reserve which shall be entered in the
local balance sheet submitted annually to the United Arab Republic tax
authorities. Such amount shall only be subject to the tax on commercial and
industrial profits.
All amounts deducted from
the aforesaid 10 per cent set aside to form the special reserve for purposes
other than the redemption of losses incurred in the trade or business carried
on by that permanent establishment situated in the United Arab Republic shall
be deemed to have been distributed in the United Arab Republic and shall be
taxed accordingly.
6. The provisions of
paragraphs 1 and 4 of this article, in the case of the United Arab Republic,
shall not affect the application of Article 4 of Law 14 of 1939, but the
provisions of those paragraphs will be applied for the purpose of elimination
of double taxation in accordance with the provisions of paragraph 2 of Article
24 of this Convention.
ARTICLE XII: Interest.--1.
Interest paid by a resident of India to a resident of the United Arab Republic
may be taxed in India.
2. Interest paid by a
resident of the United Arab Republic to a resident of India may be taxed in the
United Arab Republic. But such interest shall only be subject to the tax on
income derived from movable capital, the defence tax, the national security tax
and the supplementary taxes (which taxes shall be deducted at the source). If
paid to a natural person, the general income-tax levied on the net total income
may also be imposed.
3. The term
"interest" as used in this article includes income from Government
securities, bonds or debentures (exclusive of interest on debts secured by
mortgages on real estate, in which case Article 6 shall apply) and whether or
not carrying a right to participate in profits, and debt-claims of every kind
as well as all other income assimilated to income from money lent by the
taxation law of the State in which the income arises.
4. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
in connection with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent establishment then such
interest shall be deemed to arise in the Contracting State in which the
permanent establishment is situated.
5. The provisions of
paragraph 1 of this article in the case of the United Arab Republic shall not
affect the application of Article 4 of Law 14 of 1939, but the provisions of
that paragraph will be applied for the purpose of elimination of double
taxation in accordance with the provisions of paragraph 2 of Article 24 of this
Convention.
ARTICLE XIII:
Royalties.--1. Royalties arising in a Contracting State and paid to a resident
of the other Contracting State shall be taxable only in the first-mentioned
State.
2. The term
"royalties" as used in this article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work, any patent, trade mark, design or
model, plan, secret formula or process, or for the use of, or the right to use,
industrial, commercial or scientific equipment or for information concerning
industrial, commercial or scientific experience but does not include any
royalty or other like amount in respect of the operation of mines, quarries or
any other place of extraction of natural resources.
3. Rents and royalties
arising in a Contracting State in respect of cinematographic films and paid to
a resident of the other Contracting State shall be taxable only in the
first-mentioned State according to the tax laws of that State.
4. The provisions of this
article shall not apply where founders' shares are issued in the United Arab
Republic as a consideration for the rights mentioned in paragraph 2 of this
article and taxed in accordance with the provisions of Article 1 of Law 4 of
1939. In such event Article 11 of this Convention shall be applicable.
5. Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State.
ARTICLE XIV: Capital
gains.--1. Subject to the provisions of paragraph 3, gains from the sale,
exchange or transfer of a capital asset being immovable property, as defined in
paragraph 2 of Article 6, or movable property shall be taxable only in the
Contracting State in which such property is situated.
2. For the purpose of this
article the situs of the shares of a company shall be deemed to be in the
Contracting State where the company is incorporated.
3. Capital gains derived
from the sale, exchange or transfer of a capital asset being a ship or aircraft
shall be taxable only in the Contracting State in which such ship or aircraft
is registered.
ARTICLE XV: Independent
personal services.--1. Income derived by a resident of the United Arab Republic
in respect of professional services rendered or other independent activities of
a similar character performed in India may be taxed in India only if he is
present in India for a period or periods exceeding in the aggregate 183 days
during the relevant "previous year", and only to the extent the
income is attributable to such services or activities in India.
2. Income derived by a
resident of India in respect of professional services rendered or other
independent activities of a similar character performed in the United Arab
Republic may be taxed in the United Arab Republic only if he is present in the
United Arab Republic for a period or periods exceeding in the aggregate 183
days during the relevant "fiscal year", and only to the extent the
income is attributable to such services or activities in the United Arab
Republic.
3. The term "professional
services" includes independent scientific, literary, artistic, educational
or teaching activities as well as the independent activities of physicians,
lawyers, engineers, architects, dentists and accountants.
ARTICLE XVI: Dependent
personal services.--1. Subject to the provisions of Articles 17, 19 and 20,
salaries, wages and other similar remuneration derived by a resident of a
Contracting State in respect of an employment shall be taxable only in that
State unless the employment is exercised in the other Contracting State. If the
employment is so exercised, such remuneration as is derived therefrom may be
taxed in that other State.
2. Notwithstanding the
provisions of paragraph 1, remuneration derived by a resident of the United
Arab Republic in respect of an employment exercised in India shall not be taxed
in India if:
(a) he is present in India for a period or
periods not exceeding in the aggregate 183 days during the relevant
"previous year", and
(b) the
remuneration is paid by, or on behalf of an employer who is not resident of
India,
(c) the
remuneration is subject to United Arab Republic tax, and
(d) the remuneration is not deducted in
computing profits of an enterprise chargeable to Indian tax.
3. Notwithstanding the
provisions of paragraph 1, remuneration derived by a resident of India in
respect of an employment exercised in the United Arab Republic shall not be
taxed in the United Arab Republic if:
(a) he is present in the United Arab Republic for a period or
periods not exceeding in the aggregate 183 days during the relevant
"fiscal year", and
(b) the remuneration is paid by, or on behalf of an employer who
is not resident of the United Arab Republic, and
(c) the remuneration is subject to Indian tax, and
(d) the remuneration is not deducted in computing profits of an
enterprise chargeable to United Arab Republic tax.
4. Notwithstanding the
preceding provisions of this article, remuneration in respect of an employment
exercised aboard a ship or aircraft in international traffic, may be taxed in
the Contracting State in which the place of effective management of the
enterprise is situated.
ARTICLE XVII: Directors'
fees.--Directors' fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE XVIII: Artistes
and athletes.--1. Notwithstanding anything contained in Articles 15 and 16
income derived by public entertainers, such as theatre, motion picture, radio
or television artistes, and musicians; and by athletes from their personal
activities as such may be taxed in the Contracting State in which these
activities are exercised.
2. The provisions of
paragraph 1 shall apply only if the personal activities are exercised in the
Contracting State for a period or periods in the aggregate exceeding 15 days
during the relevant "previous year" or, as the case may be,
"fiscal year", and only in respect of the income attributable to the
personal activities exercised in that State.
ARTICLE XIX:
Pensions.--Subject to the provisions of paragraph 1 of Article 20, pensions and
other similar remuneration paid to a resident of a Contracting State in
consideration of past employment shall be taxable only in that State.
ARTICLE XX: Governmental
functions.--1. Remuneration, including pensions, paid by, or out of funds
created by, a Contracting State or a political sub-division or a local
authority thereof, to any individual in respect of services rendered to that
State or sub-division or local authority thereof in the discharge of functions
of a governmental nature may be taxed in that State.
2. The provisions of
paragraph 1 of this article shall also apply to remuneration including pensions,
paid by the Central Bank, the Post, Railways, Telephone and Telegraph, Radio
and Television organisations of the United Arab Republic and by the Reserve
Bank of India, Postal Administration, the Public Railway Authorities and the
All India Radio Organisation of India.
3. The provisions of
Articles 16, 17 and 19 shall apply to remuneration or pensions in respect of
services rendered in connection with any trade or business other than those
mentioned in paragraph 2 carried on by any of the legal entities mentioned in
this article.
ARTICLE XXI: Students.--An
individual of one of the Contracting States, who is temporarily present in the
other Contracting State solely:--
(a) as a student at a university, college or school in the other
Contracting State,
(b) as a
business or technical apprentice, or
(c) as the recipient of a grant, allowance
or award for the primary purpose of study or research from a religious,
charitable, scientific or educational organisation,
shall not be taxed in the
other Contracting State in respect of remittances from abroad for the purposes
of his maintenance, education or training or in respect of a scholarship grant.
The same shall apply to any amount representing remuneration for services
rendered in that other State, provided that such services are in connection
with his studies or practical training or are necessary for the purpose of his
maintenance.
ARTICLE XXII: Professors,
teachers and researchers.--A professor or a teacher from one of the Contracting
States who receives remuneration for teaching or scientific research, during a
period of temporary residence not exceeding two years, at a university,
college, technical school or other institution for higher education in the
other Contracting State, shall not be taxed in that other Contracting State in
respect of that remuneration.
ARTICLE XXIII: Income not
expressly mentioned.--The laws in force in either of the Contracting States
will continue to govern assessment and taxation of income in the respective
Contracting States except where express provision to the contrary is made in
this Convention.
CHAPTER IV
Method for elimination of
double taxation
ARTICLE XXIV: Exemption
and credit methods.--1. Where a person being a resident of a Contracting State
derives income from the other Contracting State and that income, in accordance
with the provisions of this Convention, shall be taxable only in that other
Contracting State, or may be taxed in that other Contracting State, the
first-mentioned State, shall, subject to the provisions of paragraph 2, exempt
such income from tax but may, in calculating tax on the remaining income of
that person, apply the rate of tax which would have been applicable if the
exempted income had not been so exempted.
2. Where a person being a
resident of a Contracting State derives income from the other Contracting State
and that income, in accordance with the provisions of Articles 11 and 12 may be
taxed in that other Contracting State, the first-mentioned State shall allow as
a deduction from the tax on the income of that person on amount equal to the
tax paid in that other Contracting State. Such deduction shall not, however,
exceed that part of the tax, as computed before the deduction is given, which
is appropriate to the income derived from that other Contracting State.
CHAPTER V
Special provisions
ARTICLE XXV :
Non-discrimination.--1. The nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which nationals of that other State in the same
circumstances and under the same conditions are or may be subjected.
2. The term
"nationals" means:
(a) all individuals possessing the nationality of a Contracting
State; and
(b) all legal persons, partnerships and
associations deriving their status as such from the law in force in a
Contracting State.
3. The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State carrying on the
same activities.
This provision shall not
be construed as obliging a Contracting State to grant to residents of the other
Contracting State any personal allowances, reliefs and reductions for taxation
purposes on account of civil status or family responsibilities which it grants
to its own residents.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first-mentioned State are or may be subjected in
the same circumstances and under the same conditions.
5. The provisions of this
article shall not be construed as affecting the application in the United Arab
Republic of the exemptions conferred in the United Arab Republic by Articles 5
and 6 of Law 14 of 1939.
6. In this article the
term "taxation" means taxes of every kind as specified in this
Convention.
ARTICLE XXVI: Mutual
agreement procedure.--1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
him in taxation not in accordance with this Convention, he may,
notwithstanding, the remedies provided by the national laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with the Convention.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Convention. They may also consult together for the elimination
of double taxation in cases not provided for in the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through representatives of
the competent authorities of the Contracting States.
ARTICLE XXVII: Exchange of
information.--1. The competent authorities of the Contracting States shall
exchange such information as is necessary for the carrying out of this
Convention and of the domestic laws of the Contracting States concerning taxes
covered by this Convention in so far as the taxation thereunder is in
accordance with this Convention. Any information so exchanged shall be treated
as secret and shall not be disclosed to any persons or authorities other than
those concerned with the assessment, including judicial determination, or
collection of the taxes which are the subject of this Convention.
2. In no case shall the
provisions of paragraph 1 be construed so as to impose on one of the
Contracting States the obligation:
(a) to carry out administrative measures at variance with the
laws or the administrative practice of that or of the other Contracting State;
(b) to supply particulars which are not obtainable under the laws
or in the normal course of the administration of that or of the other
Contracting State; and
(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade process, or
information, the disclosure of which would be contrary to public policy (order
public).
ARTICLE XXVIII: Diplomatic
and consular privileges.--Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreements.
CHAPTER VI
Final provisions
ARTICLE XXIX: Entry into
force.--1. This Convention shall be ratified and the instruments of
ratification shall be exchanged at New Delhi as soon as possible.
2. This Convention shall
enter into force on the date of the exchange of the instruments of ratification
and its provisions shall have effect :
(a) In India:
(i) in the case of income derived from operation of aircraft
(referred to in Article 8), as respects such income derived during any
"previous year" beginning on or after the first day of January, 1961;
(ii) in the case of any other income, as
respects income derived during any "previous year" beginning on or
after the first day of January of the calendar year in which the exchange of
the instruments of ratification takes place.
(b) In the United Arab Republic :
(i) in the case of income from operation of aircraft (referred
to in Article 8), as respects such income derived during any accounting period
ending on or after the first day of January, 1961;
(ii) in the case of any other income,--
(1) as respects tax on income from movable capital and tax on
wages, salaries, indemnities and pensions, which taxes are due on or after the
date on which the exchange of the instruments of ratification takes place;
(2) as respects tax on commercial and industrial profits for any
accounting period ending on or after the date on which the exchange of the
instruments of ratification takes place; and
(3) as respects tax on income derived from immovable property
(including the land tax, the building tax and the ghaffir tax), tax on profits
from liberal professions and all other non-commercial professions and the
general income-tax for the calendar year in which the exchange of the
instalments of ratification takes place.
The rules in sub-paragraph
(b) of this paragraph shall be correspondingly applicable respectively to the
defence tax, national security tax and to the supplementary taxes.
ARTICLE XXX:
Termination.--Either of the Contracting States may terminate this Convention
after a period of five years from the date on which this Convention enters into
force, by giving to other Contracting State, through the diplomatic channels,
written notice of termination, provided that such notice shall be given only on
or before the thirtieth day of June in any calendar year, and in such event,
this Convention shall cease to be effective:
(a) In India:
as respects income derived
during any "previous year" beginning on or after the first day of
January of the calendar year next following that in which the notice is given.
(b) In the United Arab Republic:
(1) as respects tax on income from movable capital and tax on
wages, salaries, indemnities and pensions, which taxes are due on or after the
first day of July in the calendar year next following that in which the notice
is given;
(2) as respects tax on commercial and industrial profits for any
accounting period ending on or after the first day of July in the calendar year
next following that in which the notice is given; and
(3) as respects tax on income derived from immovable property
(including the land tax, the buildings tax and ghaffir tax), tax on profits
from liberal professions and all other non-commercial professions and the
general income-tax for the calendar year next following that in which the
notice is given.
The rules in sub-paragraph
(b) of this paragraph shall be correspondingly applicable respectively to the
defence tax, national security tax and to the supplementary taxes.
In witness whereof the
undersigned, being duly authorised thereto, have signed this Convention.
Done in duplicate at Cairo
this twentieth day of February, 1969 in the English language.
Sd./- Apa B. Pant, Sd./-
Ahmed El. Sayed Shaban,
For the Government of
India. For
the Government of United Arab Republic
Cairo, the 20th February,
1969.
Dear Sir,
The Convention between the
Government of India and the Government of United Arab Republic for the
avoidance of double taxation with respect to taxes on income being signed
today, I have the honour, on behalf of the Government of India, to inform you
that the two Contracting States have agreed as follows:
The provisions of Article
8 (Air transport) of the said Convention being operative under the terms of
Article 29 (Entry into force) of the Convention, in the case of India, as
respects income derived from operation of aircraft during any "previous
year" beginning on or after the first day of January, 1961, and in the
case of the United Arab Republic, as respects such income derived during any
accounting period ending on or after the first day of January, 1961:
Where any taxes covered by
this Convention have been paid or are payable in one of the Contracting States
by a designated airline of the other Contracting State as respects such income
derived by it during any "previous year" or accounting period
aforesaid, the first-mentioned Contracting State shall refund such taxes to or,
as the case may be, refrain from charging such taxes from the designated
airline.
The designated airline
aforesaid shall, in the case of India, be the Air India, and in the case of the
United Arab Republic, be the United Arab Airlines.
2. I should be grateful if
you confirm your agreement to the above understanding of the provisions of
Article 8 read with Article 29 of the said Convention, and that in such case,
this note and your reply thereto shall be deemed to be part of the Convention.
3. Please accept, Your
Excellency, the assurances of my highest consideration.
Sd./- Apa B. Pant
His Excellency Mr. Ahmed
El Sayed Shaban,
Under Secretary for the
taxation Department,
Ministry of Treasury,
Government of the United
Arab Republic, Cairo.
Cairo, the 20th February,
1969.
Dear Sir,
With reference to the
Convention signed today between the Government of the United Arab Republic and
the Government of India for the avoidance of double taxation with respect to
taxes on income, you, on behalf of the Government of India, informed me of the
following:
The Convention between the
Government of India and the Government of the United Arab Republic for the
avoidance of double taxation with respect to taxes on income being signed
today, I have the honour, on behalf of the Government of India, to inform you
that the two Contracting States have agreed as follows:
The provisions of Article
8 (Air transport) of the said Convention being operative under the terms of
Article 29 (Entry into force) of the Convention, in the case of India, as
respects income derived from operation of aircraft during any "previous
year" beginning on or after the first day of January, 1961, and in the
case of the United Arab Republic, as respects such income derived during any
accounting period ending on or after the first day of January, 1961:
Where any taxes covered by
this Convention have been paid or are payable in one of the Contracting States
by a designated airline of the other Contracting State as respects such income
derived by it during any "previous year" or accounting period
aforesaid, the first-mentioned Contracting State shall refund such taxes to or,
as the case may be, refrain from charging such taxes from the designated airline.
The designated airline
aforesaid shall, in the case of India, be the Air India, and in the case of the
United Arab Republic, be the United Arab Airlines.
I should be grateful if
you confirm your agreement to the above understanding of the provisions of
Article 8 read with Article 29 of the said Convention, and that in such case,
this note and your reply thereto shall be deemed to be part of the Convention.
2. I have the honour to
confirm that the above-mentioned proposal meets with the approval of the
Government of the United Arab Republic.
Your note of today's date
and my reply thereto shall, therefore, be part of the Convention.
3. Please accept, your
Excellency, the assurances of my highest consideration.
Sd/-
Ahmed El Sayed Shaban
His Excellency Mr. Apa B.
Pant,
Ambassador of India,
Cairo.
Convention between the
Government of the Republic of India and the Government of Ukraine for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income and on capital
Notification No. 4/2002
[F. No. 501/2/92-FTD], dated 11-1-2002
Whereas the annexed
Convention between the Government of Republic of India and the Government of
Ukraine for the avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income and on capital shall enter into force, on the
31st October, 2001, on the date of the later of notifications by each of the
Contracting States to each other, of the completion of the procedures required
under their respective laws, as required by Article 30 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that all the provisions of the
said Convention shall be given effect to in the Union of India.
Convention between the
Government of the Republic of India and the Government of Ukraine for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income and on capital
The Government of the
Republic of India and the Government of Ukraine
Desiring to conclude a
Convention for the avoidance of double taxation and prevention of fiscal
evasion with respect to taxes on income and on capital and confirming their
aspiration for the development and strengthening of bilateral relations
Have agreed as follows:--
Article 1
Personal scope
This Convention shall
apply to persons who are residents of one or both of the Contracting States.
Article 2
Taxes covered
1. This Convention shall
apply to taxes on income and on capital imposed on behalf of a Contracting
State or of its political sub-divisions or local authorities, irrespective of
the manner in which they are levied.
2. There shall be regarded
as taxes on income and on capital all taxes imposed on total income, on total
capital, or on elements of income or of capital including taxes on gains from
the alienation of movable or immovable property and taxes on the total amounts
of wages or salaries paid by enterprises as well as taxes on capital
appreciation.
3. The existing taxes to
which this Convention shall apply are in particular:--
(a) In Ukraine:--
(i) the profits tax of enterprise;
(ii) the
individual income-tax;
(iii) tax on
property of enterprises;
(iv) tax on
immovable property of citizens
(hereinafter referred to
as "Ukrainian tax")
(b) In
India:--
(i) the income-tax including any surcharge thereon;
(ii) the
wealth-tax
(hereinafter referred to
as "Indian tax")
4. This Convention shall
also apply to any identical or substantially similar taxes which are imposed by
either Contracting State after the date of signature of this Convention in
addition to, or in place of, the existing taxes. The competent authorities of
the Contracting States shall notify each other of any substantial changes which
are made in their respective taxation laws.
Article 3
General definitions
1. For the purposes of
this Convention, unless the context otherwise requires:--
(a) the term "Ukraine" means the territory of Ukraine,
its continental shelf and its exclusive economic (maritime) zone, including any
territory outside the territorial sea of Ukraine which, according to
international law, is specified or may be specified, in line with the Ukrainian
law, as the territory within which the rights of Ukraine relating to sea bed
and natural resources are effective;
(b) the term "India" means the territory of India and
includes the territorial sea and airspace above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdictions, according to the Indian law and in accordance with international
law/U.N. Convention on the law of the sea;
(c) the terms "a Contracting State" and "the other
Contracting State" mean Ukraine or India as the context requires;
(d) the term "tax" means Ukrainian or Indian tax, as
the context requires, but shall not include any amount which is payable in
relation to the taxes to which this Convention applies or which represents a
penalty imposed relating to those taxes;
(e) the term "person" includes an individual, a company
and any other entity which is treated as a taxable unit under the taxation laws
in force in the respective Contracting State;
(f) the term "company" means any body corporate or any
entity which is treated as a body corporate for tax purposes under the taxation
laws in force in the respective Contracting States;
(g) the terms "enterprise of a Contracting State" and
"enterprise of the other Contracting State" mean respectively an
enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;
(h) the term "competent authority" means in the case of
Ukraine -- State Tax Administration of Ukraine or its authorised
representative; and in case of India -- Ministry of Finance (Department of
Revenue) or its authorised representative;
(i) the term "national" means:--
(a) any individual processing the citizenship of a Contracting
State;
(b) any legal person, partnership or
association deriving its status as such from the laws in force in a Contracting
State;
(j) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise which has its place
of effective management in a Contracting State, except when the ship or
aircraft is operated solely between places in the other Contracting State;
(k) the term "fiscal year" means:--
(i) in the case of Ukraine, calendar year
from 1 of January to 31 of December of the year under review;
(ii) in the
case of India, "previous year" as defined under section 3 of the
Income-tax Act, 1961.
2. As regards the
application of the Convention by a Contracting State any term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which the Convention
applies.
Article 4
Resident
1. For the purposes of
this Convention, the term "resident of a Contracting State" means any
person who, under the laws of that State, is liable to tax therein by reason of
his domicile, residence, place of management, place of registration or any
other criterion of a similar nature. But this term does not include any person
who is liable to tax in that State in respect only of income from sources or
capital situated in the Contracting State.
2. Where by reason of the
provisions of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows:--
(a) he shall be deemed to be a resident of the Contracting State in
which he has a permanent home available to him; if he has a permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the State with which his personal and economic relations are closer
(centre of vital interests);
(b) if the Contracting State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent home available to
him in other Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in
neither of them, he shall be deemed to be a resident of the State of which he
is a national;
(d) if he is a national of both Contracting States or of neither
of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated.
Article 5
Permanent establishment
1. For the purposes of
this Convention, the term "permanent establishment" means a fixed
place of business through which the business of an enterprise is wholly or
partly carried on.
2. The term
"permanent establishment" includes especially:--
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a
warehouse in relation to a person providing storage facilities for others;
(h) a
premises or warehouse used as a sales outlet or for receiving or soliciting
orders;
(i) an
installation or structure used for the exploration or exploitation of natural
resources;
(j) a building site or construction,
installation or assembly project or supervisory activities in connection
therewith, where such site, project or activities (together with other such
sites, projects or activities, if any) continue for a period of more than six
months.
3. An enterprise shall be
deemed to have a permanent establishment in a State and to carry on business
through that permanent establishment if it provides services or facilities in
connection with or supplies plant and machinery on hire used or to be used in,
the prospecting for, extraction or production of mineral oils or in connection
with such extraction or production of mineral oils in the State.
4. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:--
(a) the use of facilities solely for the purpose of storage,
display or unloading of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of fixed place of business solely for the
purpose of purchasing goods or merchandise or of collecting information, for
the enterprise;
(e) the maintenance of a fixed of business solely for the purpose
of advertising, for the supply of information, for scientific research or for
similar activities which have a preparatory or auxiliary character, for the
enterprise.
However, the provisions of
sub-paragraphs (a) to (e) shall not be applicable where the enterprise
maintains any other fixed place of business in the other Contracting State for
any purposes other than the purposes specified in the said sub-paragraphs.
5. Notwithstanding the
provisions of paragraphs 1 and 2, where a person being a resident of a
Contracting State -- other than, an agent or an independent status to whom
paragraph 6 applies, is acting on behalf of an enterprise of the other
Contracting State that enterprise shall be deemed to have a permanent
establishment in the first-mentioned State, if--
(a) he has and habitually exercises in that State an authority to
conclude contracts on behalf of the enterprise unless the activities of such
person are limited to the purchase of goods or merchandise for the enterprise;
(b) he has no such authority, but habitually maintains in the
first-mentioned State a stock of goods or merchandise from which he regularly
delivers goods or merchandise on behalf of the enterprise; or
(c) he habitually secures orders in the first-mentioned State,
wholly or almost wholly for the enterprise itself or for the enterprise and
other enterprises controlling, controlled by or subject to the same common
control, as that enterprise;
(d) in so acting, he manufactures or processes in that State for
the enterprise goods or merchandise belonging to the enterprise.
6. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that State
through a broker, general commission agent or any other agent of an independent
status, provided that such persons are acting in the ordinary course of their
business. However, when the activities of such an agent are devoted wholly or
almost wholly on behalf of that enterprise itself or on behalf of the
enterprise and other enterprises controlling, controlled by or subject to the
same common control, as that of the enterprise, he will not be considered an
agent of an independent status within the meaning of this paragraph.
7. The fact that a company
which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.
Article 6
Income from immovable
property
1. Income derived by a
resident of a Contracting State from immovable property (including income from
agriculture or forestry) situated in the other Contracting State may be taxed
in that other State.
2. The term
"immovable property" shall have the meaning which it has under the
law of the Contracting State in which the property in question is situated. The
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as immovable
property.
3. The provisions of
paragraph 1 shall also apply to income derived from the direct use, letting, or
use in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
Article 7
Business profits
1. The profits of an
enterprise of a Contracting State shall be taxable only in that State unless
the enterprise carries on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on business
as aforesaid, the profits of the enterprise may be taxed in the other State but
only so much of them as is attributable directly or indirectly to that
permanent establishment.
The words "directly
or indirectly" mean, for the purposes of this Article, that where a
permanent establishment takes an active part in negotiating, concluding or
fulfilling contracts entered into by the enterprise, then notwithstanding that
other parts of the enterprise have also participated in those transactions, there
shall be attributed to the permanent establishment that proportion of profits
of the enterprise arising out of those contracts as the contribution of the
permanent establishment to those transactions bears to that of the enterprise
as a whole.
2. Subject to the
provisions of paragraph 3, where an enterprise of a Contracting State carries
on business in the other Contracting State through a permanent establishment
situated therein, there shall in each Contracting State be attributed to that
permanent establishment the profits which it might be expected to make if it
were a distinct and separate enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment.
3. In determining the
profits of a permanent establishment, there shall be allowed as deduction
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere in accordance with the provisions of and subject to the
limitations of the tax laws of that State.
4. In so far as it has
been customary in a Contracting State to determine the profits to be attributed
to a permanent establishment on the basis of an apportionment of the total
profits of the enterprise to its various parts, nothing in paragraph 2 shall
preclude that Contracting State from determining the profits to be taxed by
such an apportionment as may be customary, the method of apportionment adopted
shall however, be such that the result shall be in accordance with the
principles contained in this Article.
5. No profits shall be
attributed to a permanent establishment by reasons of mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of the
preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.
7. Where profits include
items of income which are dealt with separately in other Articles of this
Convention, then the provisions of those Articles shall not be affected by the
provisions of this Article.
Article 8
Shipping and Air Transport
1. Profits derived by an
enterprise of a Contracting State from operation of aircraft or ships in
international traffic shall be taxable only in that State.
2. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency engaged in the operation of
aircraft or ships.
3. For the purposes of
this Article, interest on amounts connected with the operation of aircraft or
ships in international traffic shall be regarded as profits derived from the
operation of such aircraft or ships, and the provisions of Article 11
(Interest) shall not apply in relations to such interest.
4. For the purposes of this
Article, profits from the operation of aircraft or ships in international
traffic shall mean profits derived by an enterprise from transportation by air
or sea respectively of passengers, mail, livestock, goods or cargoes of every
description carried on by the owners or lessees or charterers of aircrafts or
ships. This will also include profit from:--
(a) the sale of tickets for such transportation on behalf of
other enterprises;
(b) the
rental on a bareboat ship or aircraft;
(c) the use, maintenance or rental of
containers (including trailers and related equipment for the transport of
containers) in connection with the transport of goods or merchandises in
international traffic.
Article 9
Associated enterprises
1. Where--
(a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or capital of an
enterprise of the other Contracting State, or
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a Contracting
State and an enterprise of the other Contracting State;
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
Article 10
Dividends
1. Dividends paid by a
company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State.
2. However, such dividends
may also be taxed in the Contracting State of which the company paying the
dividends is a resident and according to the laws of that State, but if the
recipient is the beneficial owner of the dividends the tax so charged shall not
exceed:--
(a) 10 per cent of the gross amount of the
dividends if the beneficial owner is a company (other than a partnership) which
holds directly at least 25 per cent of the share of the company paying the
dividends;
(b) 15 per
cent of the gross amount of the dividends in all other cases.
This paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term
"dividends" as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident.
4. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other
Contracting State of which the company paying the dividends is a resident,
through a permanent establishment situated therein, or performs in that other
State independent personal services from a fixed base situated therein, and the
holding in respect of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such case the provisions of
Article 7 or Article 14, as the case may be, shall apply.
5. Where a company which
in a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company, except in so far as such dividends are paid to a resident
of that other State or so far as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment or a fixed
base situated in that other State, nor subject the company's undistributed
profits to a tax on the company's undistributed profits, even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income
arising in such other State.
Article 11
Interest
1. Interest arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2. However, such interest
may also be taxed in the Contracting State in which it arises and according to
the laws of that State, but if the recipient is the beneficial owner of the
interest the tax so charged shall not exceed 10 per cent of the gross amount of
the interest. The competent authorities of the Contracting States shall be
mutual agreement settle the mode of application of this limitation.
3. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor's profits, and in particular, income from
government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds of debentures.
4. The provisions of
paragraphs 1 and 2 shall not apply of the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other Contracting
State in which the interest arises, through a permanent establishment situated
therein, or performs in that other State independent personal services from a
fixed base situated therein, and the debt-claim in respect of which the
interest is paid is effectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or Article 14 as the case
may be, shall apply.
5. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed to arise in the
State in which the permanent establishment or fixed base is situated.
6. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Convention.
7. The provisions of this
Article shall not apply if its main purpose or one of the main purposes of any
persons concerned with the creation or assignment of the debt-claim in respect
of which the interest is paid to take advantage of this Article by means of
that creation or assignment.
8. Notwithstanding the
provisions of paragraph 2,--
(a) interest arising in a Contracting State shall be exempt from
tax in that State provided it is derived and beneficially owned by:--
-- the Government, a political sub-division or a local
authority of the other Contracting State; or
-- the Central bank of the other Contracting State;
(b) interest arising in a Contracting State shall be exempt from
tax in that Contracting State if it is derived and beneficially owned by any
person (other than a person referred to in sub-paragraph (a) who is a resident
of the other Contracting State provided that the transaction giving rise to the
debt-claim has been approved in this regard by the Government of the
first-mentioned Contracting State.
Article 12
Royalties and fees for
technical services
1. Royalties and fees for
technical services arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State.
2. However, such royalties
and fees may also be taxed in the Contracting State in which they arise and
according to the laws of that State, but if the recipient is the beneficial
owner of the royalties and fees for technical services the tax so charged shall
not exceed 10 per cent of the gross amount of the royalties or fees for
technical services.
3. The term
"royalties" as used in this Article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work including cinematograph films or films
or tapes used for radio or television broadcasting, any patent, trade mark,
design or model, plan, secret formula or process, or for the use of, or the
right to use, industrial, commercial or scientific equipment or for information
concerning industrial, commercial or scientific experience.
4. The term "fees for
technical services" as used in this Article means payment of any amount to
any person other than payments to an employee of a person making payments, in
consideration for the services of a managerial, technical or consultative
nature, including the provision of services of technical or other personnel.
5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or
fees for technical services, being a resident of a Contracting State, carries
on business in the other Contracting State in which the royalties or fees for
technical services arise, through a permanent establishment situated therein,
or performs in that other State independent personal services from a fixed base
situated therein, and the right, property or contract in respect of which the
royalties or fees for technical services are paid is effectively connected with
such permanent establishment or fixed base. In such case the provisions of
Article 7 or Article 14, as the case may be, shall apply.
6. Royalties and fees for
technical services shall be deemed to arise in a Contracting State when the
payer is the State itself, political sub-division, a local authority or a
resident of that State. Where, however, the person paying royalties or fees for
technical services, whether he is a resident of a Contracting State or not, has
in a Contracting State a permanent establishment or a fixed base in connection
with which the liability to pay the royalties or fees for technical services
was incurred, and such royalties or fees for technical services are borne by
such permanent establishment or fixed base, then such royalties or fees for
technical services shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
7. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties or fees for
technical services paid exceeds the amount which would have been paid in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Convention.
8. The provisions of this
Article shall not apply if it is the main purposes or one of the main purposes
of person concerned with the creation or transfer of the rights or rendering of
services in respect of which the royalties or fees are paid to take advantage
of this Article by means of that creation or assignment.
Article 13
Capital gains
1. Gains derived by a
resident of a Contracting State from the alienation of immovable property,
referred to in Article 6 and situated in the other Contracting State may be
taxed in that other State.
2. Gains from the
alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or with the
whole enterprise) or of such fixed base, may be taxed in that other State.
3. Gains from the
alienation of ships or aircraft operated in international traffic by an
enterprise of a Contracting State or movable property pertaining to the
operation of such ships or aircraft, shall be taxable only in that Contracting
State.
4. Gains from the
alienation of shares of the capital stock of a company the property of which
consists directly or indirectly of immovable property and of an interest in a
partnership the assets of which consist principally of immovable property
situated in a Contracting State may be taxed in that State.
5. Gains from the
alienation of shares of a company and an interest in a partnership other than
those mentioned in paragraph 4, may be taxed in the Contracting State of which
the company or partnership is resident.
6. Gains from the
alienation of any property other than that mentioned in paragraphs 1, 2, 3, 4
and 5, shall be taxable only in the Contracting State of which the alienator is
a resident provided that those gains are subject to tax in that Contracting
State.
Independent personal
services
1. Income derived by an
individual who is a resident of a Contracting State from the performance of
professional services or other independent activities of a similar character
shall be taxable only in that State except in the following circumstances when
such income may also be taxed in the other Contracting State:--
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities, in that
case, only so much of the income as is attributable to that fixed base may be
taxed in that other State;
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days in the relevant
fiscal year, only so much of the income as is derived from his activities
performed in that other State may be taxed in that other State.
2. The term
"professional services" includes especially independent scientific,
literary, artistic, educational or teaching activities as well as the
independent activities of physicians, surgeons, lawyers, engineers, architects,
dentists and accountants.
Article 15
Dependent personal
services
1. Subject to the provisions
of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration
derived by a resident of a Contracting State in respect of an employment shall
be taxable only in that State unless the employment is exercised in the other
Contracting State. If the employment is so exercised, such remuneration as is
derived therefrom may be taxed in that other State.
2. Notwithstanding the
provisions of paragraph 1, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State if:--
(a) the recipient is present in the other State for a period or
periods not exceeding in the aggregate 183 days in any twelve month period
commencing or ending in the fiscal year concerned, and
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the other State, and
(c) the remuneration is not borne by a permanent establishment or
a fixed base which the employer has in the other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic, or aboard a boat engaged in inland waterways transport, may be taxed
in the Contracting State of which the enterprise operating the ship or aircraft
is a resident.
Article 16
Directors' Fees
Directors' fees and other
similar payments derived by a resident of a Contracting State in his capacity
as a member of the board of directors of a company which is a resident of the
other Contracting State may be taxed in that other State.
Article 17
Artistes and Sports
Persons
1. Notwithstanding the
provisions of Articles 14 and 15, income derived by a resident of a Contracting
State as an entertainer, such as a theatre, motion picture, radio or television
artiste, or a musician, or as a sportsperson, from the personal activities as
such exercised in the other Contracting State, may be taxed in that other
State.
2. Where income in respect
of personal activities exercised by an entertainer or a sportsperson in his
capacity as such accrues not to the entertainer or sportsperson himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the Contracting State in which the activities of the
entertainer or sportsperson are exercised.
3. Notwithstanding
provisions of paragraphs 1 and 2, income mentioned in this Article, will be
exempt from taxation in the State in which the activity of actor or
sportsperson is financed from the public funds of this and other State, or if
such activity is carried out according to the agreement on cultural cooperation
concluded between the Contracting States.
4. Notwithstanding the
provisions of paragraph 2 and Articles 7, 14 and 15, where income in respect of
personal activities exercised by an actor or sportsperson in his capacity as
such in a Contracting State accrues not to the actor or sportsperson himself
but to another person, that income shall be taxable only in the other
Contracting State, if that other person is supported wholly or substantially
from the public funds of that other State, including any of its political
sub-divisions or local authorities.
Article 18
Remuneration and Pensions
in Respect of Government Service
1. (a) Remuneration,
other than a pension, paid by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However,
such remuneration shall be taxable only in the other Contracting State if the
services are rendered in that State and the individual is a resident of that
State who:--
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. The provisions of
Articles 15 and 16 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or political sub-division or local authority thereof.
Article 19
Non-Government Pensions
and Annuities
1. Any pension, other than
a pension referred to in Article 19, or any annuity derived by a resident of a
Contracting State from sources within the other Contracting State may be taxed
only in the first mentioned Contracting State.
2. The term
"pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of performance
of services.
3. The term
"annuity" means a stated sum payable periodically at stated time
during life or during a specified or ascertainable period of time, under an
obligation to make the payments in return for, adequate and full consideration
in money's worth.
Article 20
Payments Received by
Students and Apprentices
1. A student or business
apprentice who is or was a resident of a Contracting State immediately before
visiting the other Contracting State and who is present in that other Contracting
State solely for the purpose of his education or training shall be exempt from
tax in that other State on:--
(a) payments made to him by persons residing outside that other
State for the purposes of his maintenance, education or training; and
(b) remuneration from employment in that other State in an amount
not exceeding US $ 500 or its equivalent amount in Ukrainian and Indian
currency during any fiscal year, as the case may be, provided that such
employment is directly related to his studies or is undertaken for the purpose
of his maintenance.
2. The benefits of this
Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken, but in
no event shall any individual have the benefits of this Article for more than
five consecutive years from the date of his arrival in that other Contracting
State.
Article 21
Payments Received by
Professors, Teachers and Research Scholars
1. A professor or teacher
who is or was a resident of a Contracting State immediately before visiting the
other Contracting State for the purpose of teaching or engaging in research, or
both, at a university, college, school or other approved institution in that
other Contracting State shall be exempt from tax in that other State on any
remuneration for such teaching or research for a period not exceeding two years
from the date of his arrival in that other State.
2. This Article shall not
apply to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.
3. For the purposes of
this Article and Article 20, an individual shall be deemed to be a resident of
a Contracting State if he is resident in that State in the fiscal year in which
he visits the other Contracting State or in the immediately preceding fiscal
year.
4. For the purposes of
paragraph 1 "approved institution" means an institution which has
been approved in this regard by the competent authority of the concerned
Contracting State.
Article 22
Other Income
1. Subject to the
provisions of paragraph 2, items of income of a resident of a Contracting
State, wherever arising, which are not expressly dealt with in the foregoing
Articles of this Convention shall be taxable only in that Contracting State.
2. The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such
income being a resident of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right of property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such a case the provisions of Article 7 or Article 15, as the case may be,
shall apply.
3. Notwithstanding the
provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing articles of this Convention
and arising in the other Contracting State may also be taxed in that other
Contracting State.
Article 23
Capital
1. Capital represented by
immovable property referred to in Article 6, owned by a resident of a
Contracting State and situated in the other Contracting State, may be taxed in
that other State.
2. Capital represented by
movable property, forming part of the business property of a permanent
establishment which an enterprise of a Contracting State has in the other
Contracting State or by movable property pertaining to the fixed base available
to a resident of a Contracting State in the other Contracting State for the
purpose of performing independent personal services may be taxed in that other
State.
3. Capital represented by
ships, aircraft or motor vehicle operated in international traffic and by
movable property pertaining to the operation of such ships, aircraft or motor
vehicles, shall be taxable only in the Contracting State of which the
enterprise owning such property is a resident.
4. All other elements of
capital of a resident of a Contracting State shall be taxable only in that
State.
Article 24
Avoidance of Double
Taxation
1. The laws in force in
either of the Contracting States will continue to govern the taxation of income
and capital in the respective Contracting States except where provisions to the
contrary are made in this Convention.
2. Where a resident of
India derives income or owns capital which, in accordance with the provisions
of this Convention, may be taxed in Ukraine, India shall allow as a deduction
from the tax on the income of that resident an amount equal to the income-tax
paid in Ukraine, whether directly or by deduction; and as a deduction from the
tax on the capital of that resident an amount equal to the capital tax paid in
Ukraine. Such deduction in either case shall not, however, exceed that part of
income-tax or tax on capital (as paid before the deduction is given), which is
attributable to the income or the capital which may be taxed in Ukraine.
3. Taking into account the
Ukrainian law on exemption from tax paid outside Ukraine (not being contrary to
the provisions of this Article), the Indian tax paid pursuant to the Indian law
and this Convention either directly or by deduction from profit, income, or
capital, would be allowed as credit against Ukrainian tax in respect of profit,
income, or capital imposed under Ukrainian law. In any such case, the credit
shall not exceed that part of Ukrainian tax (as was determined before the
deduction) which pertains to the profit, income, or capital which may be taxed
in India.
4. The tax payable in the
Contracting State mentioned in paragraphs 2 and 3 of this Article shall be
deemed to include the tax which would have been payable but for the tax
incentives granted under the laws of the Contracting State and which are
designed to promote economic development.
5. Income which in
accordance with the provisions of this Convention, is not to be subjected to
tax in a Contracting State may be taken into account for calculating the rate
of tax to be imposed in that Contracting State.
Article 25
Non-discrimination
1. The national of a
Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals or
that other State in the same circumstances are or may be subjected. This
provision shall, notwithstanding the provisions of Article 1, also apply to
persons who are not residents of one or both of the Contracting States.
2. The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprise of that other State carrying on the same
activities in the same circumstances. This provision shall not be construed as
preventing a Contracting State from charging the profits of a permanent
establishment which an enterprise of the other Contracting State has in the
first mentioned Contracting State at rate higher than that imposed on the
profits of a similar enterprise of the first mentioned State, nor as being in
conflict with the provisions of paragraph 3 of Article 7 of this Agreement.
3. Nothing contained in
this Article shall be construed as obliging a Contracting State to grant to
persons not resident in that State any personal allowances, reliefs, reductions
and deductions for taxation purposes which are by law available only to persons
who are so resident.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first mentioned State are or may be subjected in
the same circumstances.
5. In this Article, the
term "taxation" means taxes which are the subject of this Convention.
Article 26
Mutual Agreement Procedure
1. Where a resident of a
Contracting State considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with this
Convention, he may notwithstanding the remedies provided by the national laws
of those States, present his case to the competent authority of the State of
which he is a resident. The case must be presented within three years from the
date of receipt of the first notice of the action resulting in taxation not in
accordance with the provisions of the Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with the Convention.
Any agreement reached shall be implemented notwithstanding any time limits in
the national laws of the Contracting State.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs.
Article 27
Exchange of Information
1. The competent
authorities of the Contracting States shall exchange such information
(including documents) as is necessary for carrying out the provisions of the
Convention or of the domestic laws of the Contracting States, concerning taxes
covered by the Convention, in so far as the taxation thereunder is not contrary
to the Convention, in particular for the prevention of fraud or evasion of such
taxes. Any information received by a Contracting State shall be treated as
secret in the same manner as information obtained under the domestic laws of
that State. However, if the information is originally regarded as secret in the
transmitting State, it shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Convention. Such persons or authorities shall use the information only for such
purposes but may disclose the information in public court proceedings or in
judicial decisions. The competent authorities shall, through consultation,
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchange of information shall be made, including,
where appropriate, exchange of information regarding tax avoidance.
2. The exchange of
information or documents shall be either on a routine basis or on request with
reference to particular cases or both.
3. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:--
(a) to carry out administrative measures at
variance with the laws administrative practice of that or of the other
Contracting State;
(b) to supply information or documents which
are not obtainable under the laws or in the normal course of the administration
of that or of the other Contracting State;
(c) to supply information or documents which
would disclose any trade, business, industrial, commercial or professional
secret or trade process or information the disclosure of which would be
contrary to public policy.
Article 28
Assistance in Collection
1. The Contracting States
undertake to lend assistance and support to each other, in the collection of
taxes to which this Convention relates, in the cases where the taxes are
definitely due according to the laws of the State making the request.
2. In the case of a
request for enforcement of collection, tax claims of either of the Contracting
States which have been finally determined will be accepted for enforcement by
the other Contracting State to which the request is made and collected in that
State in accordance with the laws applicable to the enforcement and collection
of its taxes.
3. In the case of Indian
tax, the request will be sent by the Central Board of Direct Taxes Department
of Revenue to the State Tax Administration of Ukraine and will be accompanied
by such certificate as is required by the laws of India to establish that the
taxes have been finally determined and are due from the taxpayer.
4. In the case of
Ukrainian tax, the request will be sent by the State Tax Administration of
Ukraine to the Central Board of Direct Taxes, Department of Revenue, in India
and will be accompanied by such certificate as is required by the laws of
Ukraine to establish that the taxes have been finally determined and are due
from the taxpayer.
5. Where the tax claim has
not become final by reason of its being subject to appeal or any other
proceeding, a Contracting State may, in order to protect its revenues, request
the other Contracting State to take such interim measures in this behalf as are
lawful under the laws of that other Contracting State.
6. A request for
assistance in collection of taxes due from a taxpayer shall be made only if
adequate assets of that taxpayer are not available for recovering the taxes
from him in the Contracting State making the request.
7. The Contracting State
in which tax is recovered in pursuance of paragraphs 1, 2 and 5 of this Article
shall immediately thereafter remit the amount so recovered to the Contracting
State which made the request but it shall be entitled to reimbursement of
costs, if any, incurred in the course of rendering such assistance to the
extent mutually agreed between the competent authorities of the two Contracting
States.
Article 29
Diplomatic and Consular
Officials
Nothing in this Convention
shall affect the fiscal privileges of diplomatic or consular officials under
the general rules of international law or under the provisions of special
agreements.
Article 30
Entry into Force
Each of the Contracting
States shall notify to the other the completion of the procedures required by
its law for the bringing into force of this Convention. This Convention shall
enter into force on the date of the later of these notifications and shall
thereupon have effect:--
(a) in India, in respect of income arising in any previous year
beginning on or after the first day of April next following the calendar year
in which the Convention enters into force and in respect of capital which is
held at the expiry of the previous year following that in which the Convention
enters into force or subsequent years.
(b) in Ukraine:
(i) in respect of taxes on dividends, interest or royalties for
any payments effected on the 60th or after 60 days following the day of
Convention's coming into force;
(ii) in respect of the taxes on profit of
enterprise and tax on property of enterprises and tax on immovable property of
citizens for any taxable period starting on January 1 of the calendar year
following the year of Convention's coming into force;
(iii) in respect of the income-tax imposed on
the citizens for any payments effected on the 60th or after 60 days following
the day of Convention's coming into force.
Article 31
Termination
This Convention shall
remain in force indefinitely but either of the Contracting States may, on or
before the thirtieth day of June in any calendar year beginning after the
expiration of a period of five years from the date of its entry into force,
give the other Contracting State through diplomatic channels, written notice of
termination and, in such event, this Convention shall cease to have effect:
(a) in India, in respect of income arising in any previous year
beginning on or after the 1st day of April next following the calendar year in
which the notice is given and in respect of capital which is held at the expiry
of any fiscal year beginning on or after 1st April next following the calendar
year in which the notice of termination is given;
(b) in Ukraine:
(i) in respect of the taxes on dividends,
interest or royalties for any payments effected 60th day or after 60 days
following the day on which notice of termination is given;
(ii) in respect of the taxes on profits of
enterprise and tax on property of enterprises and tax on immovable property of
citizens for any taxable period starting on 1st January of the calendar year
following the year in which notice of termination is given;
(iii) in respect of the income-tax imposed on
the citizens for any payments effected on the 60th or after the 60th day
following the day on which notice of termination is given.
IN WITNESS WHEREOF the
undersigned, being duly authorised thereto, have signed the present Convention.
Done in duplicate at KYIV
on this April 7th day of one thousand nine hundred and ninety nine in the
Hindi, Ukrainian and English languages, all the texts being equally authentic.
In case of divergence between any of the two taxes, the English text shall be
the operative one.
For the Government of the For
the Government of Ukraine
Republic India Ukraine
(Vidya Bhushan Soni) (Mikola
Yanovich Azarov)
UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND
Double taxation avoidance
agreement between the Government of the Republic of India and the Government of
the United Kingdom of Great Britain and Northern Ireland
Notification No. 9475,
dated 11-2-1994
Whereas the annexed
Convention between the Government of the Republic of India and the Government
of the United Kingdom of Great Britain and Northern Ireland for the avoidance
of double taxation and the prevention of fiscal evasion with respect to taxes
on income and capital gains has entered into force on 26th October, 1993 on the
notification by both the Contracting States to each other of the completion of
the procedures required by their respective laws, as required by Article 30 of the
said Convention.
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that all the provisions of the
said Convention shall be given effect to in the Union of India.
Convention between the
Government of the Republic of India and the Government of the United Kingdom of
Great Britain and Northern Ireland for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains
The Government of the
Republic of India and the Government of the United Kingdom of Great Britain and
Northern Ireland;
Desiring to conclude a new
convention for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and capital gains;
Have agreed as follows:
ARTICLE 1: Scope of the
Convention.--1. This Convention shall apply to persons who are residents of one
or both of the Contracting States.
2. This Convention extends
to the territory of each Contracting State, including its territorial sea, and
to those area of the exclusive economic zone or the continental shelf adjacent
to the outer limit of the territorial sea of each State over which it has, in
accordance with international law, sovereign rights for the purpose of
exploration and exploitation of the natural resources of such areas, and
references in this Convention to the Contracting State or to either of them
shall be construed accordingly.
ARTICLE 2: Taxes
covered.--1. The taxes which are the subject of this Convention are:
(a) in the United Kingdom;
(i) the income-tax;
(ii) the
corporation tax;
(iii) the
capital gains tax; and
(iv) the
petroleum revenue tax;
(hereinafter referred in
as "United Kingdom tax");
(b) in India:
the Income-tax including any surcharge
thereon;
(hereinafter referred to
as "Indian tax").
2. This Convention shall
also apply to any identical or substantially similar taxes which are imposed by
either Contracting State after the date of signature of this Convention in
addition to, or in place of, the taxes of that Contracting State referred to in
paragraph 1 of this Article. The competent authorities of the Contracting
States shall notify each other of any substantial changes which are made in
their respective taxation laws.
ARTICLE 3: General
definitions.--1. In this Convention, unless the context otherwise requires:
(a) the term "United Kingdom" means Great Britain and
Northern Ireland;
(b) the term
"India" means the Republic of India;
(c) the term "tax" means United
Kingdom tax or Indian tax, as the context requires but shall not include any
amount which is payable in respect of any default or omission in relation to
the taxes to which this Convention applies or which represents a penalty imposed
relating to those taxes;
(d) the term "fiscal year" in
relation to Indian tax means "previous year" as defined in the
Income-tax Act, 1961 (43 of 1961) and in relation to United Kingdom tax means a
year beginning with 6 April in one year and ending with 5 April in the
following year;
(e) the terms "a Contracting
State" and "the other Contracting State" mean India or the
United Kingdom, as the context requires;
(f) the term "persons" includes an
individual, a company and any other entity which is treated as a taxable unit
under the taxation laws in force in the respective Contracting State, but,
subject to paragraph 2 of this Article, does not include a partnership;
(g) the term "company" means any
body corporate or any entity which is treated as a company or body corporate
for tax purposes;
(h) the terms "enterprise of a
Contracting State" and "enterprise of the other Contracting
State" mean respectively an enterprise carried on by a resident of a
Contracting State and an enterprise carried on by a resident of the other
Contracting State;
(i) the term "competent
authority" means, in the case of the United Kingdom, the Commissioners of
Inland Revenue or their authorised representative, and, in the case of India,
the Central Government in the Ministry of Finance (Department of Revenue) or
their authorised representative;
(j) the term "international
traffic" means any transport by a ship or aircraft operated by an
enterprise of a Contracting State except when the ship or aircraft is operated
solely between places in the other Contracting State;
(k) the term "Government" means the
Government of a Contracting State or a political sub-division or local
authority thereof. In relation to the United Kingdom, the term "political
sub-division" shall include Northern Ireland.
2. A partnership which is
treated as a taxable unit under the Income-tax Act, 1961 (43 of 1961) of India
shall be treated as a person for the purposes of this Convention.
3. As regards the
application of this Convention by a Contracting State any term not otherwise
defined shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the tax which are the
subject of this Convention.
ARTICLE 4: Fiscal
domicile.--1. For the purposes of this Convention, the term "resident of a
Contracting State" means any person who, under the law of that State, is
liable to taxation therein by reason of his domicile, residence, place of
management or any other criterion of a similar nature.
2. Where by reason of the
provisions of paragraph 1 of this Article an individual is a resident of both
Contracting States, then his status shall be determined in accordance with the
following rules:
(a) he shall be deemed to be a resident of the Contracting State
in which he has a permanent home available to him. If he has a permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the Contracting State with which his personal and economic
relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent home available to
him in either Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in
neither of them, he shall be deemed to be a resident of the Contracting State
of which he is a national;
(d) if he is national of both Contracting States or of neither of
them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1 of this Article a person other than an individual is
a resident of both Contracting States, then it shall be deemed to be a resident
of the Contracting State in which its place of effective management is
situated.
ARTICLE 5: Permanent
establishment.--1. For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business through
which the business of an enterprise is wholly or partly carried on.
2. The term
"permanent establishment" shall include especially:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) premises
used as a sales outlet or for receiving or soliciting orders;
(g) a
warehouse in relation to a person providing storage facilities for others;
(h) a mine,
an oil or gas well, quarry or other place of extraction of natural resources;
(i) an
installation or structure used for the exploration or exploitation of natural
resources;
(j) a building site or construction,
installation or assembly project or supervisory activities in connection
therewith, where such site, project or supervisory activity continues for a
period of more than six months, or where such project or supervisory activity,
being incidental to the sale of machinery or equipment, continues for a period
not exceeding six months and the charges payable for the project or supervisory
activity exceed 10 per cent of the sale price of the machinery and equipment;
(k) the furnishing of services including
managerial services, other than those taxable under Article 13 (Royalties
and fees for technical services), within a Contracting State by an enterprise
through employees or other personnel, but only if:
(i) activities of that nature continue
within that State for a period or periods aggregating more than 90 days within
any twelve-month period; or
(ii) services are performed within that State
for an enterprise within the meaning of paragraph 1 of Article 10 (Associated
enterprises) and continue for a period or periods aggregating more than 30 days
within any twelve-month period:
Provided that for the
purposes of this paragraph an enterprise shall be deemed to have a permanent
establishment in a Contracting State and to carry on business through that
permanent establishment if it provides services or facilities in connection
with, or supplies plant and machinery on hire used or to be used in, the
prospecting for, or extraction or production of, mineral oils in that State.
3. The term
"permanent establishment" shall not be deemed to include:
(a) the use of facilities solely for the
purpose of storage or display of goods or merchandise belonging to the
enterprise;
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage or
display;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise, or for
collecting information, for the enterprise;
(e) the maintenance of a fixed place of
business solely for the purpose of advertising, for the supply of information
or for scientific research, being activities solely of a preparatory or
auxiliary character in the trade of business of the enterprise. However, this
provision shall not be applicable where the enterprise maintains any other
fixed place of business in the other Contracting State for any purpose or
purposes other than the purposes specified in this paragraph;
(f) the maintenance of a fixed place of
business solely for any combination of activities mentioned in sub-paragraphs
(a) to (e) of this paragraph, provided that the overall activity of the fixed
place of business resulting from this combination is of a preparatory or
auxiliary character.
4. A person acting in a
Contracting State for or on behalf of an enterprise of the other Contracting
State -- other than an agent of an independent status to whom paragraph (5) of
this Article applies -- shall be deemed to be a permanent establishment of that
enterprise in the first-mentioned State if:
(a) he has, and habitually exercises in that
State, an authority to negotiate and enter into contracts for or on behalf of
the enterprise, unless his activities are limited to the purchase of goods or
merchandise for the enterprise; or
(b) he habitually maintains in the
first-mentioned Contracting State a stock of goods or merchandise from which he
regularly delivers goods or merchandise for or on behalf of the enterprise; or
(c) he habitually secures orders in the
first-mentioned State, wholly or almost wholly for the enterprise itself or for
the enterprise and other enterprises controlling, controlled by, or subject to
the same common control, as that
enterprise.
5. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent or any other agent of an
independent status, where such persons are acting in the ordinary course of
their business. However, if the activities of such an agent are carried out
wholly or almost wholly for the enterprise (or for the enterprise and other
enterprises which are controlled by it or have a controlling interest in it or
are subject to same common control) he shall not be considered to be an agent
of an independent status for the purposes of this paragraph.
6. The fact that a company
which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.
7. For the purposes of
this Article the term "control" in relation to a company, means the
ability to exercise control over the company's affairs by means of the direct
or indirect holding of the greater part of the issued share capital of voting
power in the company.
ARTICLE 6: Income from
immovable property.--1. Income from immovable property may be taxed in the
Contracting State in which such property is situated.
2 (a) The term
"immovable property" shall, subject to the provisions of
sub-paragraph (b) of this paragraph, be defined in accordance with the law of
the Contracting State in which the property in question is situated.
(b) The term
"immovable property" shall in any case include property accessory to
immovable property, livestock and equipment used in agriculture and forestry,
rights to which the provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed payment as
consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources. Ships and aircraft shall not be regarded
as immovable property.
3. The provisions of
paragraph 1 of this Article shall apply to income derived from the direct use,
letting, or use in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 of this Article shall also apply to the income from
immovable property of an enterprise and to income from immovable property used
for the performance of independent personal services.
ARTICLE 7: Business
profits.--1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only so much of them as is directly or
indirectly attributable to that permanent establishment.
2. Where an enterprise of
a Contracting State carries on business in the other Contracting State through
a permanent establishment situated therein, the profits which that permanent
establishment might be expected to make if it were a distinct and separate
enterprise engaged in the same or similar activities under the same or similar
conditions and dealing wholly independently with the enterprise of which it is
a permanent establishment shall be treated for the purposes of paragraph 1 of
this Article as being the profits directly attributable to that permanent
establishment.
3. Where a permanent
establishment takes an active part in negotiating, concluding or fulfilling
contracts entered into by the enterprise, then, notwithstanding that other
parts of the enterprise have also participated in those transactions, that
proportion of profits of the enterprise arising out of those contracts which
the contribution of the permanent establishment to those transactions bears to
that of the enterprise as a whole shall be treated for the purposes of
paragraph 1 of this Article as being the profits indirectly attributable to
that permanent establishment.
4. Insofar as it has been
customary in a Contracting State according to its law to determine the profits
to be attributed to a permanent establishment on the basis of an apportionment
of the total profits of the enterprise to its various parts, nothing in
paragraphs 1 and 2 of this Article shall preclude that Contracting State from
determining the profits to be fixed by such an apportionment as may be
necessary; the method of apportionment adopted shall, however, be such that the
result shall be in accordance with the principles laid down in this Article.
5. Subject to paragraphs 6
and 7 of this Article, in the determination of the profits of a permanent
establishment, there shall be allowed as deductions expenses which are incurred
for the purposes of the business of the permanent establishment, including
executive and general administrative expenses so incurred, whether in the State
in which the permanent establishment is situated or elsewhere, which are
allowed under the provisions of and subject to the limitations of the domestic
law of the Contracting State in which the permanent establishment is situated.
6. Where the law of the
Contracting State in which the permanent establishment is situated imposes a
restriction on the amount of the executive and general administrative expenses
which may be allowed, and the restriction is relaxed or overridden by any
Convention between that Contracting
State and a third State which is a member of the Organisation for Economic
Corporation and Development or a State in a comparable stage of development,
and that Convention enters into force after the date of entry into force of
this Convention, the competent authority of that Contracting State shall notify
the competent authority of the other Contracting State of the terms of the
relevant paragraph in the Convention with that third State immediately after
the entry into force of that Convention and, if the competent authority of the
other Contracting State so requests, the provisions of this Convention shall be
amended by protocol to reflect such terms.
7. Paragraph 5 of this
Article shall not apply to amounts, if any, paid (otherwise than towards
reimbursement of actual expenses) by the permanent establishment to the head
office of the enterprise or any of its other offices, by way of royalties, fees
or other similar payments in return for the use of patents or other rights, or
by way of commission, for specific services performed or for management, or,
except on the case of a banking enterprise, by way of interest on monies lent
to the permanent establishment; nor shall account be taken in the determination
of the profits of a permanent establishment of amounts charged (otherwise than
towards reimbursement of actual expenses) by the permanent establishment to the
head office of the enterprise or any of its other offices, by way of royalties,
fees or other similar payments in return for the use of patents or other
rights, or by way of commission, for specific services performed or for
management, or, except in the case of a banking enterprise, by way of interest
on monies lent to the head office of the enterprise or any of its other
offices.
8. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
9. Where profits include
items of income which are dealt with separately in other Articles of this
Convention, then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Air
transport.--1. Profits derived from the operation of aircraft in international
traffic by an enterprise of one of the Contracting States shall not be taxed in
the other Contracting State.
2. The provisions of
paragraph 1 of this Article shall likewise apply in respect of participation in
pools of any kind by enterprises engaged in air transport.
3. For the purposes of
this Article the term "operation of aircraft" shall include
transportation by air of persons, livestock, goods or mail, carried on by the
owners or lessees or charterers of aircraft, including the sale of tickets for
such transportation on behalf of other enterprises, the incidental lease of
aircraft on a charter basis and any other activity directly connected with such
transportation.
4. Gains derived by an
enterprise of a Contracting State from the alienation of aircraft owned and
operated by the enterprise, the income from which is taxable only in that
State, shall be taxed only in that State.
ARTICLE 9: Shipping.--1.
Income of an enterprise of a Contracting State from the operation of ships in
international traffic shall be taxable only in that State.
2. The provisions of
paragraph 1 of this Article shall not apply to income from journeys between
places which are situated in a Contracting State.
3. For the purposes of
this Article, income from the operation of ships includes income derived from
the rental on a bareboat basis of ships if such rental income is incidental to
the income described in paragraph 1 of this Article.
4. Notwithstanding the
provisions of Article 7 (Business profits) of this Convention, the provisions
of paragraphs 1 and 2 of this Article shall likewise apply to income of an
enterprise of a Contracting State from the use, maintenance or rental of
containers (including trailers and related equipment for the transport of
containers) used for the transport of goods or merchandise.
5. The provisions of this
Article shall apply also to income derived from participation in a pool, a
joint business or an international operating agency.
6. Gains derived by an
enterprise of a Contracting State from the alienation of ships or containers
owned and operated by the enterprise shall be taxed only in that State if
either the income from the operation of the alienated ships or containers was
taxed only in that State, or the ships or containers are situated outside the
other Contracting State at the time of the alienation.
ARTICLE 10: Associated
enterprises.--1. Where:
(a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or capital of an
enterprise of the other Contracting State, or
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a
Contracting State and an enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
2. Where a Contracting
State includes in the profits of an enterprise of that State -- and taxes
accordingly -- profits on which an enterprise of the other Contracting State
has been charged to tax in that other State and the profits so included are
profits which would have accrued to the enterprise of the first-mentioned State
of the conditions made between the two enterprises had been those which would
have been made between independent enterprises, then that other State shall
make an appropriate adjustment to the amount of the tax charged therein on
those profits. In determining such adjustment, due regard shall be had to the
other provisions of this Convention and the competent authorities of the
Contracting States shall if necessary consult each other.
ARTICLE 11: Dividends.--
1. (a) A dividend paid by a company which is a resident of the United Kingdom
to a resident of India may be taxed in India.
(b) Where under paragraph
2 of this Article, a resident of India is entitled to a tax credit in respect
of that dividend, tax may also be charged in the United Kingdom and according
to the laws of the United Kingdom on the aggregate of the amount or value of
the dividend and the amount of the tax credit, at a rate not exceeding 15 per
cent.
(c) Except as provided in
sub-paragraph (b) of this paragraph, a dividend derived from a company which is
a resident of the United Kingdom by a resident of India, who is the beneficial
owner of that dividend, shall be exempt from any tax in the United Kingdom
which is chargeable on dividends.
2. An individual who is a
resident of India and who receives a dividend from a company which is a
resident of the United Kingdom shall, provided he is the beneficial owner of
the dividend, be entitled to the tax credit in respect of that dividend which
an individual resident in the United Kingdom would have been entitled to had he
received that dividend, and to the payment of any excess of that tax credit
over his liability to United Kingdom tax.
3. A dividend paid by a
company which is a resident of India to a resident of the United Kingdom may be
taxed in the United Kingdom. The dividend may also be taxed in India but the
Indian tax is charged shall not exceed 15 per cent of the gross amount of the
dividend.
4. The preceding
paragraphs of this Article shall not affect the taxation of the company in
respect of the profits out of which the dividend is paid.
5. The provisions of
paragraphs 1 and 2 or, as the case may be, paragraph 3 of this Article shall
not apply if the beneficial owner of the dividend, being a resident of a Contracting
State, has, in the other Contracting State of which the company paying the
dividend is a resident, a permanent establishment or fixed base with which the
holding by virtue of which the dividend is paid is effectively connected. In
such a case the provisions of Article 7 (Business profits) or Article 15
(Independent personal services) of this Convention, as the case may be, shall
apply.
6. Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company, except insofar as such dividends are paid to a resident of
that other State or insofar as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment or a fixed
base situated in that other State, nor subject the company's undistributed
profits to a tax on the company's undistributed profits, even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income
arising in that other State.
7. As used in this Article
the term "dividend" means income from shares or other rights, not
being debt-claims, participating in profits, as well as income from other
corporate rights treated in the same manner as income from shares by the
taxation law of the State of which the company making the distribution is a
resident and any other item treated as a dividend or distribution under that
law.
ARTICLE 12: Interest.--1.
Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest
may also be taxed in the Contracting State in which it arises and according to
the law of that State, provided that where the resident of the other
Contracting State is the beneficial owner of the interest the tax so charged
shall not exceed 15 per cent of the gross amount of the interest.
3. Notwithstanding the
provisions of paragraph 2 of this Article:
(a) where the interest is paid to a bank carrying on a bona fide
banking business which is a resident of the other Contracting State and is the
beneficial owner of the interest, the tax charged in the Contracting State in
which the interest arises shall not exceed 10 per cent of the gross amount of
the interest;
(b) where the interest is paid to the Government of one of the
Contracting States or a political sub-division or local authority of that State
or the Reserve Bank of India, it shall not be subject to tax by the State in
which it arises.
4. Notwithstanding the
provisions of Article 7 of this Convention and of paragraphs 2 and 3 of this
Article:
(a) interest arising in India which is paid to and beneficially
owned by a resident of the United Kingdom shall be exempt from tax in India if
it is paid in respect of a loan made, guaranteed or insured, or any other
debt-claim or credit guaranteed or insured by the United Kingdom Export Credits
Guarantee Department; and
(b) interest arising in the United Kingdom which is paid to and
beneficially owned by a resident of India shall be exempt from tax in the
United Kingdom if it is paid in respect of a loan made, guaranteed or insured,
or any other debt-claim or credit guaranteed or insured by the Export Credits
and Guarantee Corporation of India and/or Export-Import Bank of India.
5. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor's profits, and in particular, income from
Government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures but, subject to
the provisions of paragraph 9 of this Article, shall not include any item which
is treated as a distribution under the provisions of Article 11 (Dividends) of
this Convention.
6. The provisions of
paragraphs 1, 2 and 3(a) of this Article shall not apply if the beneficial
owner of the interest, being a resident of a Contracting State, carries on
business in the other Contracting State in which the interest arises through a
permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the debt
claim in respect of which the interest is paid is effectively connected with
such permanent establishment or fixed base. In such case the provisions of
Article 7 (Business profits) or Article 15 (Independent personal services) of
this Convention, as the case may be, shall apply.
7. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and such interest is borne by that permanent
establishment or fixed base. Then such interest shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is
situated.
8. Where, owing to a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest paid exceeds for
whatever reason the amount which would have been paid in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In that case, the excess part of the payments shall
remain taxable according to the law of each Contracting State, due regard being
had to the other provisions of this Convention.
9. Any provision in the
laws of either Contracting State relating only to interest paid to a
non-resident company shall not operate so as to require such interest paid to a
company which is a resident of the other Contracting State to be treated as a
distribution or dividend by the company paying such interest or to be left out
of account as a deduction in computing the taxable profits of the company
paying the interest. The preceding sentence shall not apply to interest paid to
a company which is a resident of one of the Contracting States in which more
than 50 per cent of the voting power is controlled, directly or indirectly, by
a person or persons who are residents of the other Contracting State.
10. The relief from tax
provided for in paragraph 2 of this Article shall not apply if the beneficial
owner of the interest:
(a) is exempt from tax on such income in the Contracting State of
which he is a resident; and
(b) sells or makes a contract to sell the holding from which such
interest is derived within three months of the date such beneficial owner
acquired such holding.
11. The provisions of this
Article shall not apply if it was the main purpose or one of the main purposes
of any person concerned with the creation or assignment of the debt-claim in
respect of which the interest is paid to take advantage of this Article by
means of that creation or assignment.
ARTICLE 13: Royalties and
fees for technical services.--1. Royalties and fees for technical services
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State.
2. However, such royalties
and fees for technical services may also be taxed in the Contracting State in
which they arise and according to the law of that State; but if the beneficial
owner of the royalties or fees for technical services is a resident of the
other Contracting State, the tax so charged shall not exceed:
(a) in the case of royalties within paragraph 3(a) of this
Article, and fees for technical services within paragraphs 4(a) and (c) of this
Article;
(i) during the first five years for which this Convention has
effect;
(aa) 15 per cent of the gross amount of such
royalties or fees for technical services when the payer of the royalties or
fees for technical services is the Government of the first-mentioned
Contracting State or a political sub-division of that State, and
(bb) 20 per cent of the gross amount of such
royalties or fees for technical services in all other cases; and
(ii) during subsequent years, 15 per cent of
the gross amount of such royalties or fees for technical services;
and
(b) in the case of royalties within paragraph 3(b) of this
Article and fees for technical services defined in paragraph 4(b) of this
Article, 10 per cent of the gross amount of such royalties and fees for
technical services.
3. For the purposes of
this Article, the term "royalties" means:
(a) payments of any kind received as a consideration for the use
of, or the right to use, any copyright of a literary, artistic or scientific
work, including cinematograph films or work on films, tape or other means of
reproduction for use in connection with radio or television broadcasting, any
patent, trademark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience; and
(b) payments of any kind received as consideration for the use
of, or the right to use, any industrial, commercial or scientific equipment,
other than income derived by an enterprise of a Contracting State from the
operation of ships or aircraft in international traffic.
4. For the purposes of
paragraph (2) of this Article, and subject to paragraph 5 of this Article, the
term "fees for technical services" means payments of any kind to any
person in consideration for the rendering of any technical or consultancy
services (including the provision of services of technical or other personnel)
which:
(a) are ancillary and subsidiary to the application or enjoyment
of the right, property or information for which a payment described in
paragraph 3(a) of this Article is received; or
(b) are ancillary and subsidiary to the enjoyment of the property
for which a payment described in paragraph 3(b) of this Article is received; or
(c) make available technical knowledge, experience, skill,
know-how or processes, or consist of the development and transfer of a technical
plan or technical design.
5. The definitions of fees
for technical services in paragraph 4 of this Article shall not include amounts
paid:
(a) for services that the ancillary and subsidiary, as well as
inextricably and essentially linked, to the sale of property, other than
property described in paragraph 3(a) of this Article;
(b) for services that are ancillary and subsidiary to the rental
of ships, aircraft, containers or other equipment used in connection with the
operation of ships, or aircraft in international traffic;
(c) for teaching in or by educational institutions;
(d) for services for the private use of the individual or
individuals making the payment; or
(e) to an employee of the person making the payments or to any
individual or partnership for professional services as defined in Article 15
(Independent personal services) of this Convention.
6. The provisions of
paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of
the royalties or fees for technical services, being a resident of a Contracting
State, carries on business in the other Contracting State in which the
royalties or fees for technical services arise through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the right, property
or contract in respect of which the royalties or fees for technical services
are paid is effectively connected with such permanent establishment or fixed
base. In such case, the provisions of Article 7 (Business profits) or Article
15 (Independent personal services) of this Convention, as the case may be,
shall apply.
7. Royalties and fees for
technical services shall be deemed to arise in a Contracting State where the
payer is that State itself, a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties or fees
for technical services, whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or a fixed base in
connection with which the obligation to make payments was incurred and the
payments are borne by that permanent establishment or fixed base then the
royalties or fees for technical services shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is situated.
8. Where, owing to a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties or fees for technical
services paid exceeds for whatever reason the amount which would have been paid
in the absence of such relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In that case, the excess part of the
payments shall remain taxable according to the law of each Contracting State,
due regard being had to the other provisions of this Convention.
9. The provisions of this
Article shall not apply if it was the main purpose or one of the main purposes
of any person concerned with the creation or assignment of the rights in
respect of which the royalties or fees for technical services are paid to take
advantage of this Article by means of that creation or assignment.
ARTICLE 14: Capital
gains.--Except as provided in Article 8 (Air transport) and 9 (Shipping) of
this Convention, each Contracting State may tax capital gains in accordance
with the provisions of its domestic law.
ARTICLE 15: Independent
personal services.--1. Income derived by an individual, whether in his own capacity
or as a member of a partnership, who is a resident of a Contracting State in
respect of professional services or other independent activities of a similar
character may be taxed in that State. Such income may also be taxed in the
other Contracting State of such services are performed in that other State and
if:
(a) he is present in that other State for a period or periods
aggregating 90 days in the relevant fiscal year; or
(b) he, or the partnership, has a fixed base regularly available
to him, or it, in that other State for the purpose of performing his
activities;
but in each case only so
much of the income as is attributable to those services.
2. For the purpose of
paragraph 1 of this Article an individual who is a member of a partnership
shall be regarded as being present in the other State during days on which,
although he is not present, another individual member of the partnership is so
present and performs professional services or other independent activities of a
similar character in that State.
3. The term
"professional services" includes independent scientific, literary,
artistic, educational or teaching activities as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountant.
ARTICLE 16: Dependent
personal services.--1. Subject to the provisions of Articles 17 (Directors'
fees), 18 (Artistes and athletes), 19 (Governmental remuneration and pensions),
20 (Pensions and annuities), 21 (Students and trainees) and 22 (Teachers) of this
Convention, salaries, wages and other similar remuneration derived by a
resident of a Contracting State in respect of an employment shall be taxable
only in that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived
therefrom may be taxed in that other State.
2. Notwithstanding the
provisions of paragraph 1 of this Article remuneration derived by a resident of
a Contracting State in respect of an employment exercised in the other
Contracting State shall not be taxed in that other State if:
(a) he is present in that other State for a period or periods not
exceeding in the aggregate 183 days during the relevant fiscal year;
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of that other State; and
(c) the remuneration is not deductible in computing the profits
of an enterprise chargeable to tax in that other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration in respect of an employment
exercised abroad a ship or aircraft in international traffic may be taxed in
the Contracting State of which the person deriving the profits from the
operation of the ship or aircraft is a resident.
ARTICLE 17: Directors'
fees.--Directors' fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the Board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE 18: Artistes and
athletes.--1. Notwithstanding the provisions of Articles 15 (Independent
personal services) and 16 (Dependent personal services) of this Convention,
income derived by entertainers (such as stage, motion picture, radio or
television artistes and musicians) or athletes, from their personal activities
as such may be taxed in the Contracting State in which these activities are
exercised.
2. Where income arising
from personal activities are such exercised in a Contracting State by an
entertainer or athlete accrues not to that entertainer or athlete himself but
to another person, that income may, notwithstanding the provisions of Articles
7 (Business profits), 15 (Independent personal services) and 16 (Dependent
personal services) of this Convention, be taxed in that Contracting State.
3. The provisions of
paragraphs 1 and 2 of this Article shall not apply if the visit to a
Contracting State of the entertainer or the athlete is directly or indirectly
supported, wholly or substantially, from the public funds of the other
Contracting State, including a political sub-division or local authority of
that other State.
ARTICLE 19: Governmental
remuneration and pensions.--1. Remuneration, other than a pension, paid by the
Government of a Contracting State to any individual who is a national of that
State in respect of services rendered in the discharge of governmental
functions in the other Contracting State shall be exempt from tax in that other
Contracting State.
2. Any pension paid by the
Government of a Contracting State to any individual in respect of services
rendered to that Government shall be taxable only in that Contracting State.
3. The provisions of this
Article shall not apply to remuneration or pensions in respect of services
rendered in connection with any trade or business.
ARTICLE 20: Pensions and
annuities.--1. Any pension, other than a pension referred to in Article 19(2)
of this Convention, or annuity paid to a resident of a Contracting State shall
be taxable only in that State.
2. The term "pension"
means a periodic payment made in consideration of past employment or by way of
compensation for injuries received in the course of performance of employment
or any payments made under the social security legislation of either
Contracting State.
3. The term
"annuity" means a stated sum payable periodically at stated times
during life or during a specified or ascertainable period of time under an
obligation to make the payments in return for adequate and full consideration
in money or money's worth.
ARTICLE 21: Students and
trainees.--1. An individual who is a resident of a Contracting State or was a
resident of that State immediately before visiting the other Contracting State
and who is temporarily present in that other State of the primary purpose of:
(a) studying at a university or other accredited or recognised
educational institution in that other Contracting State; or
(b) securing training required to qualify him to practice a
profession or a professional speciality; or
(c) studying or doing research as a recipient of a grant,
allowance, or award from a governmental, religious, charitable, scientific,
literary or educational organisation; shall not be subject to tax by that other
Contracting State in respect of:
(i) gifts from abroad for the purposes of his maintenance,
education, study, research or training;
(ii) the
grant, allowance or award; and
(iii) income from personal services rendered in
that other Contracting State (other than any rendered by an articled clerk or
other person undergoing professional training to the person or partnership to
whom he is articled or who is providing the training) not exceeding the sum of
750 pounds sterling or its equivalent in Indian currency during any fiscal
year.
2. The exemptions under
paragraph 1 of this Article shall only extend for such period of time as may be
reasonably or customarily required for the purpose of the visit, but in no
event shall any individual have the benefit of paragraph 1 of this Article for
more than 5 years.
3. An individual who is a
resident of a Contracting State or was a resident of that State immediately
before visiting the other Contracting State and who is temporarily present in
that other State for a period not exceeding 12 months, as an employee of, or
under contract with, a resident of the first-mentioned Contracting State, for
the primary purpose of:
(a) acquiring technical, professional or business experience from
a person other than that resident of the first-mentioned Contracting State; or
(b) studying at a university or other accredited or recognised
institution in that other Contracting State;
shall not be subject to
tax by that other Contracting State on his income from personal services
performed in the other Contracting State for that period in an amount not
exceeding 1,500 pounds sterling or its equivalent in Indian currency.
4. An individual who is a
resident of a Contracting State or was a resident of that State immediately
before visiting the other Contracting State and who is temporarily present in
that other State for a period not exceeding 12 months as a participant in a
programme sponsored by the Government of the other Contracting State, for the
primary purpose of training, research or study, shall not be subject to tax by
that other Contracting State in respect of payments made by the Government of
the first-mentioned Contracting State for the purposes of his maintenance,
training, research, or study.
ARTICLE 22: Teachers.--1.
An individual who visits a Contracting State for a period not exceeding two
years for the purpose of teaching or engaging in research at a university,
college or other recognised educational institution in that State, and who was
immediately before that visit a resident of the other Contracting State, shall
be exempted from tax by the first-mentioned Contracting State on any
remuneration for such teaching or research for a period not exceeding two years
from the date he first visits that State for such purpose.
2. This Article shall only
apply to income from research if such research is undertaken by the individual
in the public interest and not primarily for the benefit of some other private
person or persons.
ARTICLE 23: Other
income.--1. Subject to the provisions of paragraph 2 of this Article, items of
income beneficially owned by a resident of a Contracting State, wherever
arising, other than income paid out of trusts or the estates of deceased
persons in the course of administration, which are not dealt with in the
foregoing Articles of this Convention, shall be taxable only in that State.
2. The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such
income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right of property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such case, the provisions of Article 7 or Article 15 of this Convention, as
the case may be, shall apply.
3. Notwithstanding the
provisions of paragraphs 1 and 2 of this Article, items of income of a resident
of a Contracting State not dealt with in the foregoing articles of this
Convention, and arising in the other Contracting State may be taxed in that
other State.
ARTICLE 24: Elimination of
double taxation.--1. Subject to the provisions of the law of the United Kingdom
regarding the allowance as a credit against United Kingdom tax of tax payable
in a territory outside the United Kingdom (with shall not affect the general
principle hereof):
(a) Indian tax payable under the laws of India and in accordance
with the provisions of this Convention, whether directly or by deduction, on
profits, income or chargeable gains from sources within India (excluding, in
the case of a dividend, tax payable in respect of the profits out of which the
dividend is paid) shall be allowed as a credit against any United Kingdom tax
computed by reference to the same profits, income or chargeable gains by
reference to which the Indian tax is computed.
(b) In the case of a dividend paid by a company which is a resident
of India to a company which is a resident of the United Kingdom and which
controls directly or indirectly at least 10 per cent of the voting power in the
company paying the dividend, the credit shall take into account (in addition to any Indian tax for which credit may be
allowed under the provisions of sub-paragraph (a) of this paragraph) the Indian
tax payable by the company in respect of the profits out of which such dividend
is paid.
2. Subject to the
provisions of the law of India regarding the allowance as a credit against
Indian tax or tax paid in a territory outside India (which shall not affect the
general principle hereof), the amount of the United Kingdom tax paid, under the
laws of the United Kingdom and in accordance with the provisions of this
Convention, whether directly or by deduction, by a resident of India, in
respect of income from sources within the United Kingdom which has been
subjected to tax both in India and the United Kingdom shall be allowed as a
credit against the Indian tax payable in respect of such income but in an
amount not exceeding that proportion of Indian tax which such income bears to
the entire income chargeable to Indian tax.
For the purposes of the
credit referred to in this paragraph, where the resident of India is a company
by which surtax is payable, the credit to be allowed against Indian tax shall
be allowed in the first instance against the income-tax payable by the company
in India and, as to the balance, if any, against the surtax payable by it in India.
3. Subject to paragraph 5
of of this Article, for the purposes of paragraph 1 of this Article the term
"Indian tax payable" shall be deemed to include:
(a) any amount which would have been payable as Indian tax but
for a deduction allowed in computing the taxable income or an exemption or
reduction of tax granted for that year in question under the provisions of the
Income-tax Act, 1961 (43 of 1961) referred to in paragraph 4(a) or (b) of this
Article;
(b) that proportion of any amount which would have been payable
as Indian tax by a resident of India but for a deduction allowed in computing
the taxable income or an exemption or reduction granted for the year in
question under the provisions of the Income-tax Act, 1961 (43 of 1961) referred
to in paragraph 4(c) of this Article which corresponds to the proportion of
that resident's total production in that year which was actually sold in the
Indian Domestic Tariff Area under Orders issued by the Chief Controller of
Imports and Exports bearing Nos. 21/90-93, 22/90-93, 23/90-93, 25/90-93,
26/90-93, 27/90-93, dated 30 March, 1990 and similar Orders from time to time
published in the Official Gazette by the Central Government under power
conferred to it by section 3 of the Import and Export (Control) Act, 1947 (18
of 1947).
4. The provisions referred
to in this paragraph are:
(a) Sections 10(4), 10(4B), 10(6)(viia), 10(15)(iv), 33AB, 80HHD,
80-I and 80-IA;
(b) any other provision which may
subsequently be enacted granting an exemption or reduction from tax which is
agreed by the competent authorities of the Contracting States to be of a
substantially similar character to a provision referred to in sub-paragraph (a)
of this paragraph, if it has not been modified thereafter or has been modified
only in minor respects so as not to affect its general character;
(c) sections 10A and 10B.
5. Relief from United
Kingdom tax shall not be given by virtue of this paragraph 3 of this Article in
respect of income from any source if the income relates to a period starting
more than 10 fiscal years after the deduction in computing taxable income or
exemption from, or reduction of, Indian
tax is first granted to the resident of the United Kingdom or to the resident
of India, as the case may be, in respect of that source.
6. Income which in
accordance with the provisions of this Convention is not to be subjected to tax
in a Contracting State may be taken into account for calculating the rate of
tax to be imposed in that Contracting State on other income.
7. For the purposes of
paragraphs 1 and 2 of this Article profits, income and chargeable gains owned
by a resident of a Contracting State which may be taxed in the other
Contracting State in accordance with the provisions of this Convention shall be
deemed to arise from sources in that other Contracting State.
ARTICLE 25:
Partnerships.--1. Where, under any provision of this Convention, a partnership
is entitled, as a resident of India, to exemption from tax in the United
Kingdom on any income or capital gains, that provision shall not be construed
as restricting the right of the United Kingdom to tax any member of the
partnership who is a resident of the United Kingdom on his share of the income
and capital gains of the partnership; but any such income or gains shall be treated
for the purposes of Article 24 of this Convention as income or gains from
sources in India.
2. Nothing in Article 11
of this Convention shall entitle a partnership which is a resident of India to
a tax credit in respect of dividends paid to the partnership by a company which
is a resident of the United Kingdom; but any member of the partnership who is a
resident of India shall be regarded as entitled to the tax credit to which he
would have been entitled under that Article, if his share of those dividends
has been paid to him by the company which is a resident of the United Kingdom.
ARTICLE 26:
Non-discrimination.--1. The nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which nationals of that other State in the same
circumstances are or may be subjected.
2. The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State carrying on the
same activities in the same circumstances or under the same conditions. This provision
shall not be construed as preventing a Contracting State from charging the
profits of a permanent establishment which an enterprise of the other
Contracting State has in the first-mentioned State at a rate of tax which is
higher than that imposed on the profits of a similar enterprise of the
first-mentioned Contracting State, nor as being in conflict with the provisions
of paragraph 4 of Article 7 of this Convention.
3. Nothing contained in
this Article shall be construed as obliging a Contracting State to grant to
individuals not resident in that State any personal allowances, reliefs and
reductions for taxation purposes which are by law available only to individuals
who are so resident.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first-mentioned State are or may be subjected.
5. In this Article, the
term “taxation” means taxes which are the subject of this Convention.
ARTICLE 27: Mutual
agreement procedure.--1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
him in taxation not in accordance with this Convention, he may, notwithstanding
the remedies provided by the national laws of those States, present his case to
the competent authority of the Contracting State of which he is a resident.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with the Convention.
3. The competent authorities
of the Contracting States shall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of the
Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs.
ARTICLE 28: Exchange of
information.--1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out the provisions of
this Convention or of the domestic laws of the Contracting State concerning
taxes covered by this Convention, insofar as the taxation thereunder is not
contrary to this Convention, in particular for the prevention of fraud or evasion
of such taxes. The exchange of information is not restricted by Article 1 of
this Convention. Any information received by a Contracting State shall be
treated as secret in the same manner as information obtained under the domestic
laws of that State. However, if the information is originally regarded as
secret in the transmitting State it shall be disclosed only to persons or
authorities (including courts and administrative bodies) involved in the
assessment or collection of, the enforcement or prosecution in respect of, or
the determination of appeals in relation to, the taxes which are the subject of
this Convention. Such persons or authorities shall use the information only for
such purposes but may disclose the information in public court proceedings or
in judicial decisions. The competent authorities shall, through consultation,
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchanges of information shall be made, including,
where appropriate, exchanges of information regarding tax avoidance.
2. In no case shall the
provisions of paragraph 1 of this Article be construed so as to impose on a
Contracting State the obligation:
(a) to carry out administrative measures at variance with the
laws and administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws
or in the normal course of the administration of that or of the other
Contracting State;
(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade process, or
information, the disclosure of which would be contrary to public policy.
ARTICLE 29: Diplomatic and
consular officials.--1. Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreements.
2. Notwithstanding the
provisions of paragraph 1 of Article 4 (Fiscal domicile) of this Convention, an
individual who is a member of the diplomatic, consular or permanent mission of
a Contracting State which is situated in the other Contracting State and who is
subject to tax in that other State only if he derives income from sources
therein, shall not be deemed to be a resident of that other State for the
purposes of this Convention.
ARTICLE 30: Entry into
force.--1. Each of the Contracting States shall notify to the other the
completion of the procedures required by its law for the bringing into force of
this Convention. This Convention shall enter into force on the date of the
later of these notifications and shall thereupon have effect:
(a) in the United Kingdom:
(i) in respect of income-tax and capital gains tax, for any year
of assessment beginning on or after 6 April in the calendar year next following
that in which the later of the notifications is given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1 April in the calendar year next
following that in which the later of the notifications is given;
(iii) in respect of petroleum revenue tax, for
any chargeable period beginning on or after 1 January in the calendar year next
following that in which the later of the notifications is given;
(b) in India, in respect of income arising in any fiscal year
beginning on or after the first day of April next following the calendar year
in which the later of the notifications is given.
2. Subject to the
provisions of paragraph 3 of this Article, the Convention between the
Government of the United Kingdom of Great Britain and Northern Ireland and the
Government of India for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Income and Capital Gains signed in New
Delhi on 16 April, 1981 (hereinafter referred to as “the 1981 Convention”)
shall terminate and cease to be effective from the date upon which this
Convention has effect in respect of the taxes to which this Convention applies
in accordance with the provisions of paragraph 1 of this Article.
3. Where any provisions of
the 1981 Convention would have afforded any greater relief from tax than is due
under this Convention, any such provision as aforesaid shall continue to have
effect:
(a) in the United Kingdom, for any year of assessment or
financial year; and
(b) in India,
for any fiscal year;
beginning, in either case,
before the entry into force of this Convention.
ARTICLE 31:
Termination.--This Convention shall remain in force until terminated by one of
the Contracting States. Either Contracting State may terminate the Convention,
through the diplomatic channel, by
giving notice of termination at least six months before the end of any calendar
year beginning after the expiration of ten years from the date of entry into force
of the Convention. In such event, the Convention shall cease to have effect:
(a) in the United Kingdom:
(i) in respect of income-tax and capital
gains tax, for any year of assessment beginning on or after 6 April in the
calendar year next following that in which the notice is given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1 April in the calendar year next
following that in which the notice is given;
(iii) in respect of petroleum revenue tax, for
any chargeable period beginning on or after 1 January in the calendar year next
following that in which the notice is given;
(b) in India, in respect of income arising in any fiscal year
beginning on or after the first day of April next following the calendar year
in which the notice is given.
In witness whereof the
undersigned, duly authorised thereto by their respective Governments, have
signed this Convention.
Done on this 25th day of
January, 1993, in New Delhi on two original copies each in the Hindi and
English languages, both texts being equally authentic. In case of divergence
between the two texts, the English text shall be the operative one.
For the Government of For
the Government of the United
the Republic of India: Kingdom
of Great Britain and Northern Ireland
(S. RAMAMURTI) (NICHOLAS
FENN)
BRITISH
HIGH COMMISSION
NEW DELHI. JANUARY 25,
1993
Your Excellency,
I have the honour to refer
to the Convention between the Government of the United Kingdom of Great Britain
and Northern Ireland and the Government of the Republic of India for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect
to Taxes on Income and Capital Gains which has been signed today and to propose
on behalf of the Government of the United Kingdom of Great Britain and Northern
Ireland:
(a) that, in applying sub-paragraph (j) of paragraph 2 of Article
5, for the purpose of determining whether a building site or construction
installation or assembly project or supervisory activity in connection therewith
has continued for a period of more than six months, the Contracting States
shall:
(i) take no account of time previously spent by employees of the
enterprise on other sites or projects which have no connection with the site or
project in question;
(ii) apply the more than six months test
separately to each site or project which has no connection with any other site
or project and to each group of connected sites or projects; and
(iii) regard a building site as a single site,
even if several contracts have been entered into for the work being done,
provided that it forms a coherent whole commercially and geographically;
(b) that, in applying paragraph 3 of Article 7, for the purpose
of determining whether a permanent establishment has taken an active part in
negotiating, concluding or fulfilling contracts entered into by the enterprise,
the Contracting States shall take into consideration all relevant circumstances
and, in particular, the fact that a contract or order relating to the purchase
or provision of goods or services was negotiated or placed with the head office
of the enterprise, rather than with the permanent establishment, shall not
preclude them from determining that the permanent establishment did take an
active part in negotiating, concluding or fulfilling that contract;
(c) that, in applying paragraph 1 of Article 8, for the purpose
of determining the profits of an enterprise which are derived from the
operation of aircraft in international traffic, the Contracting States shall
treat interest derived from the investment or deposit of receipts arising
directly from the operation of aircraft in international traffic as being
included in those profits, but shall not treat interest derived from the
reinvestment of such interest as being so included.
If the foregoing proposal
is acceptable to the Government of the Republic of India I have the honour to
suggest that the present Note and Your Excellency‘s reply to that effect should
be regarded as constituting an agreement between the two Governments in this
matter.
I avail myself of this
opportunity to renew to Your Excellency the assurances of my highest
consideration
(NICHOLAS FENN)
High Commissioner
His Excellency Mr. S.
Ramamurti,
Chairman,
Central Board of Direct
Taxes,
Ministry of Finance,
Government of India,
New Delhi.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF DIRECT
TAXES
NEW DELHI. JANUARY 25,
1993.
Your Excellency,
I have the honour to
acknowledge receipt of Your Excellency‘s Note of today which reads as follows:
“I have the honour to
refer to the Convention between the Government of the United Kingdom of Great
Britain and Northern Ireland and the Government of the Republic of India for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income and Capital Gains which has been signed today and to
propose on behalf of the Government of the United Kingdom of Great Britain and
Northern Ireland:
(a) that, in applying sub-paragraph (j) of paragraph 2 of Article
5, for the purpose of determining whether a building site or construction,
installation or assembly project or supervisory activity in connection
therewith has continued for a period of more than six months, the Contracting
States shall:
(i) take no account of time previously
spent by employees of the enterprise on other sites or projects which have no
connection with the site or project in question;
(ii) apply the more than six months test
separately to each site or project which has no connection with any other site
or project and to each group of connected sites or projects; and
(iii) regard a building site as a single site,
even if several contracts have been entered into for the work being done
provided that it forms a coherent whole commercially and geographically;
(b) that, in applying paragraph 3 of Article 7, for the purpose
of determining whether a permanent establishment has taken an active part in
negotiating, concluding or fulfilling contracts entered into by the enterprise,
the Contracting States shall take into consideration all relevant circumstances
and, in particular, the fact that a contract or order relating to the purchase
or provision of goods or services was negotiated or placed with the head office
of the enterprise, rather than with the permanent establishment, shall not
preclude them from determining that the permanent establishment did take an
active part in negotiating, concluding or fulfilling that contract;
(c) that, in applying paragraph 1 of Article 8, for the purpose
of determining the profits of an enterprise which are derived from the
operation of aircraft in international traffic, the Contracting States shall
treat interest derived from the investment or deposit of receipts arising
directly from the operation of aircraft in international traffic as being
included in those profits, but shall not treat interest derived from the
reinvestment of such interest as being so included.
If the foregoing proposal
is acceptable to the Government of the Republic of India I have the honour to
suggest that the present Note and Your Excellency‘s reply to that effect should
be regarded as constituting an agreement between the two Governments in this
matter.”
In reply, I have the
honour to state that the Government of the Republic of India accepts the
proposal made therein and agrees that Your Excellency‘s Note and the present
reply shall constitute an agreement between the Government of the Republic of
India and the Government of the United Kingdom of Great Britain and Northern Ireland
in this matter.
I avail myself of this
opportunity to renew to Your Excellency the assurances of my highest
consideration.
(S. RAMAMURTI)
Chairman
Central Board of Direct
Taxes India
HIS EXCELLENCY
Sir Nicholas Fenn, KCMG
British High Commissioner
in India
New Delhi.
Convention between the
Government of India and the Government of the United Kingdom of Great Britain
and Northern Ireland for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxation income and capital gains
Notification No.
501/6/75-FTD, dated 23 November, 1981
G.S.R. 612(E).--Whereas
the annexed Convention between the Government of India and the Government of
the United Kingdom of Great Britain and Northern Ireland for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income and capital gains has come into force on the notification by both the
Contracting States to each other of completion of the procedures required by
their respective laws, as required by Article 27 of the said Convention.
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that all the provisions of the
said Convention shall be given effect to in the Union of India.
The Government of India
and the Government of the United Kingdom of Great Britain and Northern Ireland;
Desiring to conclude a Convention
for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income and capital gains :
Have agreed as follows:
ARTICLE I: Personal
scope.--This Convention shall apply to persons who are residents of one or both
of the Contracting States.
ARTICLE II: Taxes
covered.--(1) The taxes which are the subject of this Convention are:
(a) In the United Kingdom of Great Britain and Northern Ireland:
(i) the income tax;
(ii) the corporation tax;
(iii) the
capital gains tax;
(iv) the
petroleum revenue tax; and
(v) the
development land tax;
(hereinafter referred to
as "United Kingdom tax");
(b) In India:
(i) the income-tax and any surcharge
thereon imposed under the Income-tax Act, 1961 (43 of 1961); and
(ii) the surtax
imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(hereinafter referred to
as "Indian tax").
2. This Convention shall
also apply to any identical or substantially similar taxes which are imposed by
either Contracting State after the date of signature of this Convention in
addition to, or in place of, the existing taxes. The competent authorities of
the Contracting States shall notify each other of any substantial changes which
are made in their respective taxation laws.
ARTICLE III: General
definitions.--1. In this Convention unless the context otherwise requires--
(a) the term "United Kingdom" means Great Britain and
Northern Ireland, including any area outside the territorial sea of the United
Kingdom which in accordance with international law has been or may hereinafter
be designated under the laws of the United Kingdom concerning the Continental
Shelf, as an area within which the rights of the United Kingdom with respect to
the sea bed and sub-soil and their natural resources may be exercised;
(b) the term "tax" means United Kingdom tax or Indian
tax, as the context requires;
(c) the term "fiscal year" in relation to Indian tax
means 'previous year' as defined in the Income-tax Act, 1961 (43 of 1961);
(d) the terms "a Contracting State" and "the other
Contracting State" mean the United Kingdom or India, as the context
requires;
(e) the term "person" includes an individual, a company
and any other body of persons;
(f) the term "company" means any body corporate or any
entity which is treated as a company or body corporate for tax purposes;
(g) the terms "enterprise of a Contracting State" and
"enterprise of the other Contracting State" mean respectively an
enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;
(h) the term "competent authority" means, in the case
of the United Kingdom the Commissioners of Inland Revenue or their authorised
representative, and in the case of India the Central Government in the
Department of Revenue;
(i) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise which has its place
of effective management in a Contracting State except when the ship or aircraft
is operated solely between places in the other Contracting State; and
(j) the term "Government" means the Government of a
Contracting State or a political sub-division or a local authority thereof. In
relation to the United Kingdom the term "political sub-division" shall
include Northern Ireland.
2. As regards the
application of this Convention by a Contracting State any term not otherwise
defined shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the taxes which are
the subject of this Convention.
ARTICLE IV: Fiscal
domicile.--1. For the purposes of this Convention, the term "resident of a
Contracting State" means any person who, under the law of that State, is
liable to taxation therein by reason of his domicile, residence, place of
management or any other criterion of a similar nature.
2. Where by reason of the
provisions of paragraph 1 of this article an individual is a resident of both
Contracting States, then his status shall be determined in accordance with the
following rules:
(a) he shall be deemed to be a resident of the Contracting State
in which he has a permanent home available to him. If he has a permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the Contracting State with which his personal and economic
relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent home available to
him in either Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in
neither of them, he shall be deemed to be a resident of the Contracting State
of which he is a national;
(d) if he is a national of both Contracting States or of neither
of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1 of this article a person other than an individual is
a resident of both Contracting States, then it shall be deemed to be a resident
of the Contracting State in which its place of effective management is
situated.
ARTICLE V: Permanent
establishment.--1. For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business in which
the business of the enterprise is wholly or partly carried on.
2. The term
"permanent establishment" shall include especially:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) premises
used as a sales outlet or for receiving or soliciting orders;
(g) a
warehouse in relation to a person providing storage facilities for others;
(h) a mine,
quarry or other place of extraction of natural resources;
(i) an
installation of structure used for the exploration of natural resources;
(j) a building site or construction,
installation or assembly project or supervisory activities in connection
therewith, where such site, project or supervisory activity, continues for a
period of more than six months, or where such project or supervisory activity,
being incidental to the sale of machinery or equipment, continues for a period
not exceeding six months and the charges payable for the project or supervisory
activity exceed 10 per cent of the sale price of the machinery and equipment.
3. The term
"permanent establishment" shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage or
display of goods or merchandise belonging to the enterprise;
(b) the maintenance of a fixed place of business solely belonging
to the enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise, or for collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the
purpose of advertising, for the supply of information or for scientific
research, being activities solely of a preparatory or auxiliary character in
the trade or business of the enterprise. However, this provision shall not be
applicable where the enterprise maintains any other fixed place of business in
the other Contracting State for any purpose or purposes other than the purposes
specified in this paragraph.
4. A person acting in a
Contracting State for or on behalf of an enterprise of the other Contracting
State--other than an agent of an independent status to whom paragraph 5 of this
article applies--shall be deemed to be a permanent establishment of that
enterprise in the first-mentioned State if:
(a) he has and habitually exercises in that State, an authority
to negotiate and enter into contracts for or on behalf of the enterprise,
unless his activities are limited to the purchase of goods or merchandise for
the enterprise; or
(b) he habitually maintains in the first-mentioned Contracting
State a stock of goods or merchandise belonging to the enterprise from which he
regularly delivers goods or merchandise for or on behalf of the enterprise.
5. An enterprise of
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent or any other agent of an
independent status, where such persons are acting in the ordinary course of
their business. However, if the activities of such an agent are carried out
wholly or almost wholly for the enterprise (or for the enterprise and other
enterprises which are controlled by it or have a controlling interest in it) he
shall not be considered to be an agent of an independent status for the
purposes of this paragraph.
6. The fact that a company
which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.
ARTICLE VI: Income from
immovable property.--1. Income from immovable property may be taxed in the
Contracting State in which such property is situated.
(a) The term "immovable property" shall, subject to the
provisions of sub-paragraph (b) of this paragraph be defined in accordance with
the law of the Contracting State in which the property in question is situated.
(b) The term "immovable property" shall in any case
include property accessory to immovable property, livestock and equipment used
in agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property and rights to
variable or fixed payments as consideration for the working of or the right to
work, mineral deposits, sources and other natural resources. Ships and aircraft
shall not be regarded as immovable property.
3. The provisions of
paragraph 1 of this article shall apply to income derived from the direct use,
letting, or use in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 of this article shall also apply to the income from
immovable property of an enterprise and to income from immovable property used
for the performance of professional services.
ARTICLE VII: Business
profits.--1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only so much of them as is attributable to
that permanent establishment.
2. Where an enterprise of
a Contracting State carries on business in the other Contracting State through
a permanent establishment situated therein, there shall in each Contracting
State be attributed to that permanent establishment the profits which it might
be expected to make if it were a distinct and separate enterprise engaged in
the same or similar activities under the same or similar conditions and dealing
wholly independently with the enterprise of which it is a permanent
establishment.
3. In so far as it has
been customary in a Contracting State according to its law to determine the
profits to be attributed to a permanent establishment on the basis of an
apportionment of the total profits of the enterprise to its various parts,
nothing in paragraph 2 of this article shall preclude that Contracting State
from determining the profits to be taxed by such an apportionment as may be
customary; the method of apportionment adopted shall, however, be such that the
result shall be in accordance with the principles laid down in this article.
4 (a) In the
determination of the profits of a permanent establishment, there shall be
allowed as deductions expenses of the enterprise which are incurred for the
purposes of the permanent establishment, including only those executive and
general administrative expenses incurred, whether in the State in which the
permanent establishment is situated or elsewhere, which are allowed under the
provisions of the domestic law of the Contracting State in which the permanent
establishment is situated:
Provided that where the
law of the Contracting State in which the permanent establishment is situated
imposes a restriction on the amount of the executive and general administrative
expenses which may be allowed, and that restriction is relaxed or overridden by
any Convention between that Contracting State and a third State which enters
into force after the date of entry into force of this Convention, the competent
authority of that Contracting State shall notify the competent authority of the
other Contracting State of the terms of the corresponding paragraph in the
Convention with that third State immediately after the entry into force of that
Convention and, if the competent authority of the other Contracting State so
requests, the provisions of this sub-paragraph shall be amended by Protocol to
reflect such terms.
(b) However, no such deduction shall be allowed in respect of
amounts, if any, paid (otherwise than towards reimbursement of actual expenses)
by the permanent establishment to the head office of the enterprise or any of
its other offices, by way or royalties, fees or other similar payments in
return for the use of patents or other rights, or by way of commission, for
specific services performed or for management, or, except in the case of a
banking enterprise, by way of interest on monies lent to the permanent
establishment. Likewise, no account shall be taken in the determination of the
profits of a permanent establishment of amounts charged (otherwise than towards
reimbursement of actual expenses) by the permanent establishment of the head
office of the enterprise or any of its other offices, by way of royalties, fees
or other similar payments in return for the use of patents or other rights, or
by way of commission, for specific services performed or for management, or,
except in the case of a banking enterprise, by way of interest on monies lent
to the head office of the enterprise or any of its other offices.
5. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
6. Where profits include
items of income which are dealt with separately in other articles of this
Convention, then the provisions of those articles shall not be affected by the
provisions of this article.
ARTICLE VIII: Air
transport.--1. Income derived from the operation of aircraft in international traffic
by an enterprise of one of the Contracting State shall not be taxed in the
other Contracting State.
2. The provisions of
paragraph 1 of this article shall likewise apply in respect of participation in
pools of any kind by enterprises engaged in air transport.
3. For the purposes of
this article:
(a) interest on funds connected with the operation of aircraft in
international traffic shall be regarded as income from the operation of such
aircraft; and
(b) the term "operation of aircraft" shall include
transportation by air of persons, livestock, goods or mail, carried on by the
owners or lessees or charterers of aircraft, including the sale of tickets for
such transportation on behalf of other enterprises, the incidental lease of
aircraft on a charter basis and any other activity directly connected with such
transportation.
4. Gains derived by an
enterprise of a Contracting State from the alienation of aircraft owned and
operated by the enterprise, the income from which is taxable only in that State,
shall be taxed only in that State.
ARTICLE IX: Shipping.--1.
Income of an enterprise of a Contracting State from the operation of ships in
international traffic shall be taxable only in that State.
2. Notwithstanding the
provisions of paragraph 1 of this article such income may be taxed in the other
Contracting State from which it is derived provided that:
(a) the income is in respect of any one or more of the first ten
fiscal years for which this Convention has effect; and
(b) the tax chargeable on that income shall be 50 per cent of the
tax which would have been chargeable in the absence of this Convention in
respect of the income for the first five fiscal years for which this Convention
has effect and 25 per cent of such tax for the next following five years.
3. The provisions of
paragraphs 1 and 2 of this article shall not apply to income from journeys
between places which are situated in a Contracting State.
4. For the purposes of
this article income from the operation of ships includes income derived from
the rental on a bareboat basis of ships if such rental income is incident to the income described in paragraph 1 of
this article.
5. Notwithstanding the
provisions of Article 7 (Business profits), the provisions of paragraphs 1, 2
and 3 of this article shall likewise apply to income of an enterprise of a
Contracting State from the use, maintenance or rental of containers (including
trailers and related equipment for the transport of containers) used for the
transport of goods or merchandise.
6. The provisions of this
article shall apply also to income derived from participation in a pool, a joint business or an international
operating agency.
7. Gains derived by an
enterprise of a Contracting State from the alienation of ships or containers owned
and operated by the enterprise shall be taxed only in that State if either the
income from the operation of the alienated ships or containers was taxed only
in that State, or the ships or containers are situated outside the other
Contracting State at the time of the alienation.
ARTICLE X: Associated
enterprises.--Where--
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State; or
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
ARTICLE XI: Dividends.--1.
(a) A dividend paid by a company which is a resident of the United Kingdom to a
resident of India may be taxed in India.
(b) Where under paragraph 2 of the article, a resident of India
is entitled to a tax credit in respect of that dividend, tax may also be
charged in the United Kingdom and according to the laws of the United Kingdom
on the aggregate of the amount or value of the dividend and amount of the tax
credit, at a rate not exceeding 15 per cent.
(c) Except as provided in sub-paragraph (b) of this paragraph, a
dividend derived from a company which is a resident of the United Kingdom by a
resident of India, who is the beneficial owner of that dividend shall be exempt
from any tax in the United Kingdom which is chargeable on dividends.
2. A resident of India who
receives a dividend from a company which is a resident of the United Kingdom
shall, subject to the provisions of paragraph 3 of this article and provided he
is the beneficial owner of the dividend, be entitled to the tax credit in
respect of that dividend which an individual resident in the United Kingdom
would have been entitled to had he received that dividend, and to the payment of
any excess of that tax credit over his liability to United Kingdom tax.
3. Paragraph 2 of this
article shall not apply where the beneficial owner of the dividend is a company
which either alone or together with one or more associated companies controls
directly or indirectly at least 10 per cent of the voting power in the company
paying the dividend. For this purpose two companies shall be deemed to be
associated if one is controlled directly or indirectly by the other, or both
are controlled directly or indirectly by a third company.
4. A dividend paid by a
company which is a resident of India to a resident of the United Kingdom may be
taxed in the United Kingdom. The dividend may also be taxed in India but, where
the dividend relates in whole or in part to a new contribution, the Indian tax
so charged shall not exceed 15 per cent of the gross amount of the dividend
attributable to the new contribution.
5. The preceding
paragraphs of this article shall not affect the taxation of the company in
respect of the profits out of which the dividend is paid.
6. The provisions of
paragraphs 1, 2 and 3 or, as the case may be, paragraph 4 of this article shall
not apply if the beneficial owner of the dividend, being a resident of a
Contracting State, has in the other Contracting State of which the company
paying the dividend is a resident a permanent establishment or fixed base with
which the holding by virtue of which the dividend is paid is effectively
connected. In such a case the provisions of Article 7 (Business profits) or
Article 15 (Independent personal services), as the case may be, shall apply.
7. Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State that other State may not impose any tax on the dividends paid
by the company, except insofar as such dividends are paid to a resident of that
other State or insofar as the holding in respect of which the dividends are
paid is effectively connected with a permanent establishment or a fixed base situated
in that other State nor subject the company's undistributed profits to a tax on
the company's undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income arising in
that other State.
8. As used in this article
the term "dividend" means income from shares or other rights, not
being debt-claims, participating in profits, as well as income from other
corporate rights treated in the same manner as income from shares by the taxation
law of the State of which the company making the distribution is a resident and
any other item (other than interest which falls within the provisions of
Article 12) treated as a dividend or distribution under that law.
9. As used in paragraph 4
of this article the term "new contribution" means any share capital,
other than bonus shares, issued after the date of entry into force of this
Convention by a company which is a resident of India, and beneficially owned by
a resident of the United Kingdom.
ARTICLE XII: Interest.--1.
Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest
may also be taxed in the Contracting State in which it arises and according to
the law of that State, provided that where the resident of the other
Contracting State is the beneficial owner of the interest and it is paid in
respect of a loan or debt first created after the date of entry into force of
this Convention, the tax so charged shall not exceed 15 per cent of the gross
amount of the interest.
3. Notwithstanding the
provisions of paragraph 2 of this article:
(a) where the interest is paid to a bank carrying on a bona fide
banking business which is a resident of the other Contracting State and is the
beneficial owner of the interest, the tax charged in the Contracting State in
which the interest arises shall not exceed 10 per cent of the gross amount of
the interest;
(b) where the interest is paid to the Government of one of the
Contracting State or a political sub-division or local authority of that State
or the Reserve Bank of India, if shall not be subject to tax by the State in
which it arises.
4. The term
"interest" as used in this article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor's profits, and in particular, income from
government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures.
5. The provisions of
paragraphs 1, 2 and 3 of this article shall not apply if the beneficial owner
of the interest, being a resident of a Contracting State, carries on business
in the other Contracting State in which the interest arises through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated
therein, and the debt-claim in respect of which the interest is paid is
effectively connected with such permanent establishment or fixed base. In such
case the provisions of Article 7 (Business profits) or Article 15 (Independent
personal services), as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment or
a fixed base in connection with which the indebtedness on which the interest is
paid was incurred, and such interest is borne by that permanent establishment
or fixed base, then such interest shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is situated.
7. Where, owing to a
special relationship between the payer and some other person, the amount of the
interest paid exceeds for whatever reason the amount which would have been paid
in the absence of such relationship, the provisions of this article shall apply
only to the last-mentioned amount. In that case, the excess part of the
payments shall remain taxable according to the law of each Contracting State,
due regard being had to the other provisions of this Convention.
ARTICLE XIII: Royalties
and fees for technical services.--1. Royalties and fees for technical services
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State.
2. However, such royalties
and fees for technical services may also be taxed in the Contracting State in
which they arise and according to the law of that State; provided that where
the royalties or fees for technical services are paid to a resident of the
other Contracting State who is the beneficial owner thereof and they are paid
in respect of a right or property which is first granted, or under a contract
which is signed, after the date of entry into force of this Convention, the tax
so charged shall not exceed 30 per cent of the gorss amount of the royalties or
fees for technical services.
3. The term
"royalties" as used in this article means payments of any kind
including rentals received as a consideration for the use of, or the right to
use:
(a) any patent, trademark, design or model, plan, secret formula
or process;
(b) industrial, commercial or scientific equipment, or
information concerning industrial, commercial or scientific experience; and
(c) any copyright of literary, artistic or scientific work,
cinematographic films, and films or tapes for radio or television,
broadcasting,
but does not include
royalties or other amounts paid in respect of the operation of mines or
quarries or of the extraction or removal of natural resources.
4. The term "fees for
technical services" as used in this article means payments of any kind to
any person, other than payments to an employee of the person making the
payments and to any individual for independent personal services mentioned in
Article 15 (Independent personal services), in consideration for services of a
managerial, technical or consultancy nature, including the provision of
services of technical or other personnel.
5. The provisions of
paragraphs 1 and 2 of this article shall not apply if the beneficial owner of
the royalties or fees for technical services, being a resident of a Contracting
State, carries on business in the other Contracting State in which the
royalties or fees for technical services arise through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the right or property
or contract in respect of which the royalties or fees for technical services
are paid is effectively connected with such permanent establishment or fixed
base. In such case, the provisions of Article 7 (Business profits) or Article
15 (Independent personal services), as the case may be, shall apply.
6. Royalties and fees for
technical services shall be deemed to arise in a Contracting State where the
payer is that State itself, a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties or fees
for technical services, whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or a fixed base in
connection with which the obligation to make the payments was incurred and the
payments are borne by that permanent establishment or fixed base, then the
royalties or fees for technical services shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is
situated.
7. Where, owing to a
special relationship between the payer and some other person, the amount of the
royalties or fees for technical services paid exceeds for whatever reason the
amount which would have been paid in the absence of such relationship, the
provisions of this article shall apply only to last-mentioned amount. In that
case, the excess part of the payments shall remain taxable according to the law
of each Contracting State, due regard being had to the other provisions of this
Convention.
ARTICLE XIV: Capital
gains.--Except as provided in Article 8 (Air transport) and Article 9
(Shipping) of this Convention, each Contracting State may tax capital gains in
accordance with the provision of its domestic law.
ARTICLE XV: Independent
personal services.--1. Income derived by a resident of a Contracting State in
respect of professional services or other independent activities of a similar
character may be taxed in that State. Such income may also be taxed in the
other Contracting State if such services are performed in that other State and
if:
(a) he is present in that other State for a period or periods
aggregating 90 days in the relevant fiscal year; or
(b) he has a fixed base regularly available to him in that other
State for the purpose of performing his activities;
but in each case only so
much of the income as is attributable to those services.
2. The term
"professional services" includes independent scientific, literary,
artistic educational or teaching activities as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants.
ARTICLE XVI: Dependent
personal services.--1. Subject to the provisions of Article 17 (Directors'
fees), Article 18 (Artistes and athletes), Article 19 (Government remuneration
and pensions), Article 20 (Students and trainees) and Article 21 (Teachers),
salaries, wages and other similar remuneration derived by a resident of a
Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised
in the other Contracting State. If the employment is so exercised, such
remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the
provisions of paragraph 1 of this article, remuneration derived by a resident
of the United Kingdom in respect of an employment exercised in India shall not
be taxed in India if:
(a) he is present in India for a period or
periods not exceeding in the aggregate 183 days during the relevant fiscal
year;
(b) the
remuneration is paid by, or on behalf of, an employer who is not a resident of
India; and
(c) the remuneration is not deductible in
computing the profits of an enterprise chargeable to Indian tax.
3. Notwithstanding the
provisions of paragraph 1 of this article remuneration derived by a resident of
India in respect of an employment exercised in the United Kingdom shall not be
taxed in the United Kingdom if:
(a) he is present in the United Kingdom for a period or periods
not exceeding in the aggregate 183 days during the relevant fiscal year;
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the United Kingdom; and
(c) the remuneration is not deductible in computing the profits
of an enterprise chargeable to United Kingdom tax.
4. Notwithstanding the
preceding provisions of this article, remuneration in respect of an employment
exercised aboard a ship or aircraft in international traffic may be taxed in
the Contracting State of which the person deriving the profits from the
operation of the ship or aircraft is a resident.
ARTICLE XVII: Directors'
fees.--Directors' fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE XVIII: Artistes
and athletes.--1. Notwithstanding the provisions of Article 15 (Independent
personal services) and Article 16 (Dependent personal services), income derived
by entertainers (such as stage, motion picture, radio or television artistes
and musicians) or athletes, from their personal activities as such may be taxed
in the Contracting State in which these activities are exercised.
2. Where income arising
from personal activities as such exercised in a Contracting State by an
entertainer or athlete accrues not to that entertainer or athlete himself but
to another person, that income may, notwithstanding the provisions of Article 7
(Business profits), Article 15 (Independent personal services) and Article 16
(Dependent personal services), be taxed in that Contracting State.
3. The provisions of
paragraphs 1 and 2 of this Article shall not apply if the visit to Contracting
State of the entertainer or the athlete is directly or indirectly supported,
wholly or substantially, from the public
funds of the other Contracting State, including a political sub-division
or local authority of that other State.
ARTICLE XIX: Governmental
remuneration and pensions.--1. Remuneration, other than a pension, paid by the
Government of India to any individual who is a national of India in respect of
services rendered in the discharge of governmental functions in the United
Kingdom shall be exempt from United Kingdom tax.
2. Remuneration, other
than a pension, paid by the Government of the United Kingdom to any individual
who is a national of the United Kingdom in respect of services rendered in the
discharge of governmental functions in India shall be exempt from Indian tax.
3. Any pension paid by the
Government of a Contracting State to any individual in respect of services
rendered to that Government shall be taxable only in that Contracting State.
4. The provisions of this
article shall not apply to remuneration or pensions in respect of services
rendered in connection with any trade or business.
ARTICLE XX: Students and
trainees.--1. An individual who is a resident of a Contracting State or was
resident of that State immediately before visiting the other Contracting State
and who is temporarily present in that other State for the primary purpose of:
(a) studying at a university or other
accredited or recognised educational institution in that other Contracting
State; or
(b) securing training required to qualify
him to practise a profession or a professional speciality; or
(c) studying or doing research as a
recipient of a grant, allowance, or award from a governmental, religious, charitable,
scientific, literary or educational organisation;
shall not be subject to
tax by that other Contracting State in respect of:
(i) gifts from abroad for the purposes of his maintenance,
education, study, research or training;
(ii) the
grant, allowance, or award; and
(iii) income from personal services rendered in
that other Contracting State (other than any rendered by an articled clerk or
other person undergoing professional training to the persons or partnership to
whom he is articled or who is providing the training) not exceeding the sum of
750 pounds sterling or its equivalent in Indian currency during any fiscal
year.
2. The exemptions under
paragraph 1 of this article shall only extend for such period of time as may be
reasonably or customarily required for the purpose of the visit, but in no
event shall any individual have the benefit of paragraph 1 of this article for
more than 5 years.
3. An individual who is a
resident of a Contracting State or was a resident of that State immediately
before visiting the other Contracting State and who is temporarily present in
that other State for a period not exceeding 12 months, as an employee on or under contract with a
resident of the first-mentioned Contracting State, for the primary purpose of:
(a) acquiring technical, professional or
business experience from a person other than that resident of the
first-mentioned Contracting State; or
(b) studying at a university or other
accredited or recognised educational institution in that other Contracting
State,
shall not be subject to
tax by that other Contracting State on his income from personal services
performed in the other Contracting State for that period in an amount not
exceeding 1,500 pounds sterling or its equivalent in Indian currency.
4. An individual who is a
resident of Contracting State or was a resident of that State immediately
before visiting the other Contracting State and who is temporarily present in
that other State for a period not exceeding 12 months as a participant in a programme
sponsored by the Government of the other Contracting State, for the primary
purpose of training, research or study, shall not be subject to tax by that
other Contracting State in respect of payments made by the Government of the
first-mentioned Contracting State for the purposes of his maintenance,
training, research or study.
ARTICLE XXI: Teachers.--1.
An individual who visits a Contracting State for a period not exceeding two
years for the purpose of teaching or engaging in research at a university,
college or other recognised educational institution in that State, and who was
immediately before that visit a resident of the other Contracting State, shall
be exempted from tax by the first-mentioned Contracting State on any
remuneration for such teaching or research for a period not exceeding two years
from the date he first visits that State for such purpose.
2. This article shall only
apply to income from research if such research is undertaken by the individual
in the public interest and not primarily for the benefit of some other private
person or persons.
ARTICLE XXII: Elimination
of double taxation.--1. Subject to the provisions of the law of the United
Kingdom regarding the allowance as a credit against United Kingdom tax of tax
payable in a territory outside the United Kingdom (which shall not affect the
general principle hereof):
(a) Indian tax payable under the laws of India and in accordance
with the provisions of this Convention, whether directly or by deduction, on
profits, income or chargeable gains from sources within India (excluding, in
the case of a dividend, tax payable in respect of the profits out of which the
dividend is paid) shall be allowed as a credit against any United Kingdom tax
computed by reference to the same profits, income or chargeable gains by
reference to which the Indian tax is computed.
(b) In the case of a dividend paid by a company which is a
resident of India to a company which is a resident of the United Kingdom and
which controls directly or indirectly at least 10 per cent of the voting power
in the company paying the dividend, the credit shall take into account (in
addition to an Indian tax for which credit may be allowed under the provisions
of sub-paragraph (a) of this paragraph) the Indian tax payable by the company
in respect of the profits out of which such dividend is paid:
Provided that this
paragraph shall not apply to a company which is a resident of the United
Kingdom and is a Petroleum Company as defined for the purposes of Schedule 9 to
the Oil Taxation Act, 1975.
2. Subject to the
provisions of the law of India regarding the allowance as a credit against
Indian tax of tax payable in a territory outside India (which shall not affect
the general principle hereof), the amount of United Kingdom tax payable, under
the laws of the United Kingdom and in accordance with the provisions of this
Convention, whether directly or by deduction, by a resident of India, in
respect of income from sources within the United Kingdom which has been
subjected to tax both in India and the United Kingdom shall be allowed as a
credit against the Indian tax payable in respect of such income but in an
amount not exceeding that proportion of Indian tax which such income bears to
the entire income chargeable to Indian tax. In no case shall credit for United
Kingdom tax be given against the additional income-tax on undistributed income
of companies.
For the purposes of the
credit referred to in this paragraph, where the resident of India is a company
by which surtax is payable, the credit to be allowed against Indian tax shall
be allowed in the first instance against the income-tax payable by the company
in India and, as to the balance if any, against the surtax payable by it in
India.
3. For the purposes of
paragraph 1 of the article the term "Indian tax payable" shall be
deemed to include any amount which would have been payable as Indian tax but
for deduction allowed in computing the taxable income or an exemption or
reduction of tax granted for that year under:
(a) sections 10(4), 10(4A), 10(6)(viia), 10(15)(vi), 32A, 33A,
35B, 35CC, 80HH, 80J and 80K of the Income-tax Act, 1961 (43 of 1961), so far
as they were in force on and have not been modified since the date of signature
of this Convention or have been modified only in minor respects so as not to
affect their general character; or
(b) any other provision which may subsequently be made granting
an exemption or reduction from tax which is agreed by the competent authorities
of the Contracting States to be of a substantially similar character, if it has
not been modified thereafter or has been modified only in minor respects so as
not to affect its general character:
Provided that relief from
United Kingdom tax shall not be given by virtue of this paragraph in respect of
income from any source if the income relates to a period starting more than 10
fiscal years after the exemption from, or reduction of, Indian tax is first
granted to the resident of the United Kingdom or to the resident of India, as
the case may be, in respect of that source.
4. Income which in
accordance with the provisions of this Convention is not to be subjected to tax
in a Contracting State may be taken into account for calculating the rate of
tax to be imposed in that Contracting State on other income.
5. For the purposes of
paragraphs 1 and 2 of this article profits, income and chargeable gains owned
by a resident of a Contracting State which may be taxed in the other
Contracting State in accordance with the provisions of this Convention shall be
deemed to arise from sources in that other Contracting State.
6. Where profits on which
an enterprise of a Contracting State has been charged to tax in that State are
also included in the profits of an enterprise of the other State and the
profits so included are profits which would have accrued to that enterprise of
the other State, if the conditions made between the enterprises had been those
which would have been made between enterprises dealing wholly independently
with each other, the amount included in the profits of both enterprises shall
be treated for the purposes of this article as income from a source in the
other State of the enterprise of the first-mentioned State and relief shall be
given accordingly under the provisions of paragraph 1 or paragraph 2 of this
article.
7. For the purposes of
this article the term "in accordance with the provisions of this
Convention" shall include taxes which are the subject of this Convention
and imposed on income not expressly mentioned in the Convention.
ARTICLE XXIII:
Non-discrimination.--1. The nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which nationals of this other State in the same
circumstances are or may be subjected.
2. The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State carrying on the
same activities in the same circumstances or under the same conditions. This
provision shall not be construed as preventing a Contracting State from
charging the profits of a permanent establishment which an enterprise of the
other Contracting State has in the first-mentioned State at a rate of tax which
is higher than that imposed on the profits of a similar enterprise of the
first-mentioned Contracting State, nor as being in conflict with the provisions
of paragraph 4 of Article 7 of this Convention.
3. Nothing contained in
this article shall be construed as obliging a Contracting State to grant to
individuals not resident in that State any personal allowances, reliefs and
reductions for taxation purposes which are by law available only to individuals
who are so resident.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other similar
enterprises of that first-mentioned State are or may be subjected.
5. In this article, the
term "taxation" means taxes which are the subject of this Convention.
ARTICLE XXIV: Mutual
agreement procedure.--1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
him in taxation not in accordance with this Convention, he may, notwithstanding
the remedies provided by the national laws of those States, present his case to
the competent authority of the Contracting State of which he is a resident.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with the Convention.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs.
ARTICLE XXV: Exchange of
information.--The competent authorities of the Contracting States shall
exchange such information (being information and documents which are at their
disposal under their respective taxation laws and obtained in the normal course
of administration) as is necessary for carrying out the provisions of this
Convention or for the prevention of fraud or the administration of statutory
provisions against legal avoidance in relation to the taxes which are the
subject of this Convention. Any information or documents so exchanged shall be
treated as secret but may be disclosed to persons (including a court or
administrative body) concerned with assessment, collection, enforcement or
prosecution in respect of taxes which are the subject of this Convention. No
information or documents shall be exchanged which would disclose any trade,
business, industrial or professional secret or any trade process.
ARTICLE XXVI: Diplomatic
and consular officials.--1. Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials under the general rule of
international law or under the provisions of special agreements.
2. Notwithstanding the provisions of paragraph 1 of Article 4
(Fiscal domicile), an individual who is a member of the diplomatic consular or
permanent mission of a Contracting State which is situated in the other
Contracting State and who is subject to tax in that other State only if he
derives income from sources therein, shall not be deemed to be a resident of
that other State for the purposes of this Convention.
ARTICLE XXVII: Entry into
force.--Each of the Contracting States shall notify to the other the completion
of the procedures required by its law for the bringing into force of this Convention.
This Convention shall enter into force on the date of the later of these
notifications and shall thereupon have effect:
(a) in the United Kingdom of Great Britain and Northern Ireland:
(i) in respect of income-tax and capital
gains tax, for any year of assessment beginning on or after 6 April in the
calendar year next following that in which the later of the notifications is
given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1 April in the calendar year next following
that in which the later of the notifications is given;
(iii) in respect of petroleum revenue tax, for
any chargeable period beginning on or after 1 January in the calendar year next
following that which the later of the notifications is given;
(iv) in respect of development land tax, for
any realised development value accruing on or after 1 April in the calendar
year next following that in which the later of the notifications is given:
(b) in India, in respect of income arising in any fiscal year
beginning on or after the first day of
April next following the calendar year in which the later of the notifications
is given.
ARTICLE XXVIII:
Termination.--This Convention shall remain in force until terminated by one of
the Contracting States. Either Contracting State may terminate the Convention,
through, the diplomatic channel, by giving, notice of termination at least six
months before the end of any calendar year beginning after the expiration of
ten years from the date of entry into force of the Convention, in such event,
the Convention shall cease to have effect:
(a) in the United Kingdom of Great Britain and Northern Ireland;
(i) in respect of income-tax and capital
gains tax, for any year of assessment beginning on or after 6 April in the calendar
year next following that in which the notice is given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1
April in the calendar year next following that in which the notice is given;
(iii) in respect of petroleum revenue tax, for
any chargeable period beginning on or after 1 January in calendar year next
following that in which the notice is given; and
(iv) in respect of development land tax, for
any realised development value accruing on or after 1 April in the calendar
year next following that in which the notice is given;
(b) in India, in respect of income arising in any fiscal year
beginning on or after the first day of April next following the calendar year
in which the notice is given.
In witness whereof the undersigned
duly authorised thereto by their respective Governments have signed this
Convention.
Done on this 16th day of
April, 1981 in New Delhi in two original copies each in the Hindi and English
languages, both the texts being equally authentic. In case of divergence
between the two texts, the English text shall be the operative one.
For the Government of
The United Kingdom of
Great Britain and
For the Government of
India : Northern
Ireland :
G. Ramachandran J.
A. Thomson
Agreement
between the Government of India and the Government of United Kingdom for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to duties on the estates of deceased persons
Notification
No. 21 E.D., dated the 2 April, 1956
In pursuance of the
Explanation to section 30 of the Estate Duty Act, 1953 (XXXIV of 1953), the
Central Government hereby declares the United Kingdom of Great Britain and
Northern Ireland to be a reciprocating country for the purposes of the said
Act.
In exercise of the powers
conferred by Section 30 of the Estate Duty Act, 1953 (XXXIV of 1953), the
Central Government hereby fixes the 30th June, 1956, as the date on which the
Agreement, dated the 3rd April, 1956, entered into between the Government of
India and the Government of the United Kingdom of Great Britain and Northern
Ireland for the avoidance of double taxation and prevention of fiscal evasion
with respect to duties on the estates of deceased persons and annexed hereto
shall come into force.
The Government of India
and Government of the United Kingdom of Great Britain and Northern Ireland,
desiring to conclude an Agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to duties on the estates of deceased
persons, have agreed as follows:
ARTICLE I: The duties
which are the subject of the present Agreement are--
(a) In India, the estate duty imposed under the Estate Duty Act,
1953 (No. 34 of 1953), and
(b) In the
United Kingdom, the estate duty imposed in Great Britain.
ARTICLE II: (1) In the
present Agreement, unless the context otherwise requires:
(a) the term 'India' means all the States and territories in the
Union of India;
(b) The term
'United Kingdom' means Great Britain and Northern Ireland;
(c) The term 'Great Britain' means England,
Wales and Scotland and does not include the Channel Islands and the Isle of
Man;
(d) The term 'Territory' when used in
relation to one of the other Contracting Government means India or Great
Britain, as the context requires;
(e) The term 'duty' means the estate duty
imposed in India or the estate duty imposed in Great Britain as the context
requires.
(2) For the purposes of
the present Agreement, the question whether a deceased person was at the time of
his death domiciled in any part of the territory of one of the Contracting
Governments shall be determined in accordance with the law in force in that
territory.
(3) In the application of
the provisions of the present Agreement by either Contracting Government, any
term not otherwise defined shall, unless the context otherwise requires, have
the meaning which it has under the law of that Contracting Government relating
to duty.
ARTICLE III: (1) Subject
to paragraph (2) of this article, duty shall not be imposed in India on the
death of a person who was not domiciled at the time of his death in any part of
India but was domiciled in some part of Great Britain on any property situate
outside India :
Provided that nothing in
this paragraph shall prevent the imposition of duty in India on--
(a) any settled property of which the deceased was life tenant
where the settlor was domiciled in India at the time the settlement took
effect; or
(b) property that passes under a disposition or devolution
regulated by the law of some part of India.
(2) Nothing in the present
Agreement shall affect any provision of the law of India imposing duty on
shares in or debentures of a company incorporated outside India which carries
on business in India and which has been treated for the purposes of the Indian
Income-tax Act, 1922 (11 of 1922), as resident in India for two out of the
three completed assessments immediately preceding the death; nor shall anything
in the present Agreement be considered to confer a right to a credit against
duty so imposed for any duty imposed in Great Britain on any such shares or
debentures.
(3) Duty shall not be
imposed in Great Britain on the death of a person who was not domiciled at the
time of his death in any part of Great Britain but was domiciled in some part
of India on any property situate outside Great Britain:
Provided that nothing in
this paragraph shall prevent the imposition of duty in Great Britain on any
property which passes under a disposition or devolution regulated by the law of
some part of Great Britain.
ARTICLE IV: (1) Subject to
paragraph (2) of this article, where a person was at the time of his death
domiciled in any part of the territory of one of the Contracting Governments,
the situs of any property which for the purposes of duty passes or is deemed to
pass on his death shall, for the purposes of the imposition of duty and of the
credit to be allowed under Article 6, be determined exclusively in accordance
with the rules in Article 5 of the present Agreement.
(2) Paragraph (1) of this
article shall apply if, and only if, apart from the said article--
(a) duty would be imposed on the property
under the law of each of the Contracting Government; or
(b) duty would be imposed on the property
under the law of one of the Contracting Governments and would, but for some
specific exemption, also be imposed thereon under the law of the other
Contracting Government.
ARTICLE V: The rules
referred to in paragraph (1) of Article 4 are:--
(a) Rights or interests (otherwise than by way of security) in or
over immovable property shall be deemed to be situated at the place where such
property is located;
(b) Rights or interests (otherwise than by way of security) in or
over tangible movable property other than such property for which specific
provision is hereinafter made, and in or over bank or currency notes, other
forms of currency recognised as legal tender in the place of issue, negotiable
bills of exchange and negotiable promissory notes, shall be deemed to be
situated at the place where such property, notes, currency or documents are
located at the time of death of the deceased person or if in transitu, at the
place of destination.
(c) Debts, secured or unsecured and whether under seal or not,
excluding the forms of indebtedness for which specific provision is made
therein, shall be deemed to be situated at the place where the debtor was
residing at the time of death of the deceased person:
Provided that, if the
interest on any such debt was chargeable to income-tax under the Indian
Income-tax Act, 1922 (11 of 1922), as having accrued or arisen in India, the
debt shall be deemed to be situated in India;
(d) Bank accounts shall be deemed to be situated at the branch at
which the account was kept;
(e) Securities issued by any government or by any local or public
authority shall be deemed, if in bearer form, to be situated at the place where
they were located at the time of the deceased's death and if inscribed or
registered, at the place of inscription or registration:
Provided that sterling
securities issued by the Government of India or of any State in India, or by
any local or public authority in India, shall be deemed to be situated in the
territory in which the deceased was domiciled at the time of his death;
(f) Shares, stock debentures or debentures stock in a company
(including any such property held by a nominee, whether the beneficial
ownership is evidenced by scrip certificates or otherwise) shall be deemed to
be situated at the place where the company was incorporated;
(g) Moneys payable under a policy of assurance or insurance,
whether under seal or not, shall be deemed to be situated at the place where
the policy provides that the moneys shall be payable or, in the absence of any
such provision, at the head office of the company issuing the policy;
(h) An interest in a partnership shall be deemed to be situated
at the place where the business is carried on; and if the business is carried
on at more than one place an appropriate proportion of the interest shall be deemed
to be situated at each of those places;
(i) Goodwill as a trade business of professional asset shall be
deemed to be situated at the place where the trade, business or profession to
which it pertains is carried on; and if a trade, business or profession is
carried on at more than one place an appropriate proportion of the goodwill
shall be deemed to be situated at each of those places;
(j) Ships and aircraft and shares thereof shall be deemed to be
situated at the place of registration of the ship or aircraft;
(k) Patents, trade marks and designs shall be deemed to be
situated at the place where they are registered;
(l) Copyright, franchises and rights or licences to use any
copyrighted material, patent trade mark or design shall be deemed to be situated
at the place where the rights arising therefrom are exercisable;
(m) Rights or causes of action ex-delicto surviving for the
benefits of the estate of a deceased person shall be deemed to be situated at
the place where such rights or causes of action arose;
(n) A judgment-debt shall be deemed to be situated where the
judgment is recorded:
Provided that where the
judgment was given in proceedings instituted to enforce a debt which, had it
passed on the death, would have fallen within paragraph (c) of this article,
the judgment-debt shall be deemed to be situated where that debt would have
been situated;
(o) Any other right or interest shall--
(i) Where the deceased person was domiciled at the date of his
death in the territory of only one of the Contracting Governments, be deemed to
be situated at the place determined by the law in force in the territory of the
other Contracting Government;
(ii) Where the deceased person was domiciled
at the date of his death in the territory of both Contracting Governments, be
deemed to be situated--
(aa) for the purposes of the imposition of duty
in India, at the place determined by the law in force in India, and
(bb) for the purposes of the imposition of duty
in Great Britain, at the place determined by the law in force in England or
Scotland as the case may be.
ARTICLE VI: (1) Where one
Contracting Government imposes duty on any property which is not situated in
its territory but is situated in the territory of the other Contracting
Government, the former Government shall allow against so much of its duty (as
otherwise computed) as is attributable to that property a credit (not exceeding
the amount of the duty so attributable) equal to so much of the duty imposed in
the territory of the other Contracting Government as is attributable to such
property.
(2) Where each Contracting
Government imposes duty on any property which is situated--
(a) in the territory of both Governments, or
(b) outside
both territories,
each Government shall
allow against so much of its duty (as otherwise computed) as is attributable to
that property a credit which bears the same proportion to the amount of its
duty so attributable or to the amount of the other Contracting Government's
duty attributable to the same property, whichever is less, as the former amount
bears to the sum of both amounts.
(3) For the purposes of
this article, the amount of the duty of a Contracting Government attributable
to any property shall be ascertained after taking into account any credit,
allowance or relief, or any remission or reduction of duty, otherwise than in
respect of duty payable in the territory of the other Contracting Government.
ARTICLE VII: (1) Any claim
for a credit or for a refund of duty founded on the provisions of the present
Agreement shall be made within six years from the date of death of the deceased
person in respect of whose estate the claim is made, or, in the case of a
reversionary interest where payment of duty is deferred until the date on which
the interest falls into possession within six years from that date.
(2) Any such credit
allowed or refund made shall be allowed or made without payment of interest on
the amount credited or refunded.
ARTICLE VIII: (1) The
taxation authorities of the Contracting Governments shall exchange such
information (being information available under the respective taxation laws of
the Contracting Governments) as is necessary for carrying out the provisions of
the present Agreement or for the prevention of fraud or the administration of
statutory provisions against legal avoidance in relation to the duties which
are the subject of the present Agreement. Any information so exchanged shall be
treated as secret and shall not be disclosed to any person other than those
concerned with the administration, assessment and collection of the duties
which are the subject of the present Agreement. No information shall be
exchanged which might disclose any trade secret or trade process.
(2) As used in this
article, the term 'taxation authorities' means--
(a) in the case of India, the Central Board of Revenue or their
authorised representative;
(b) in the case of Great Britain, the
Commissioners of Inland Revenue or their authorised representative;
(c) in the case of Northern Ireland (to
which the present Agreement applies under Article X), the Minister of Finance
or his authorised representative; and
(d) in the case of any territory to which
the present Agreement is extended under Article IX, the competent authority for
the administration in such territory of the duties to which the present
Agreement applies.
ARTICLE IX: (1) The
present Agreement may be extended, either in its entirety or with
modifications, to any territory for whose international relations the United
Kingdom is responsible and which imposes duties substantially similar in
character to those which are the subject of the present Agreement, and any such
extension, shall take effect from such date and subject to such modifications
and conditions (including conditions as to termination) as may be specified and
agreed between the Contracting Governments in notes to be exchanged for this
purpose.
(2) The termination in
respect of India or the United Kingdom of the present Agreement under Article
XII shall, unless otherwise expressly agreed by the Contracting Governments,
terminate the application of the Agreement to any territory to which it has
been extended under this article.
ARTICLE X: The present
Agreement shall apply in relation to the estate duty imposed in Northern
Ireland as it applies in relation to the estate duty in Great Britain, but
shall be separately terminable in respect of Northern Ireland by the same
procedure as is laid down in Article XII.
ARTICLE XI: The present
Agreement shall come into force on the date on which the last of all such
things shall have been done in India and the United Kingdom as are necessary to
give the Agreement the force of law in India and the United Kingdom
respectively, and the Agreement shall be effective only as to--
(a) the estates of persons dying on or after such date; and
(b) the estate of any person dying before
such date and after the 15th October, 1953, where the accountable person elects
that the provisions of the present Agreement shall be applied to such estate.
ARTICLE XII: (1) The
present Agreement shall remain in force for not less than three years after the
date of its coming into force.
(2) If, not less than six
months before the expiration such period of three years, neither of the
Contracting Governments shall have given to the other Contracting Government
written notice through diplomatic channels of its intention to terminate the
present Agreement, the Agreement shall remain in force after such period of
three years until either of the Contracting Governments shall have given written
notice of such intention, in which event the present Agreement shall not be
effective as to the estates of persons dying on or after the date (not being
earlier than the sixtieth day after the date of such notice) specified in such
notice, or, if no date is specified, on or after the sixtieth day after the
date of such notice.
In witness whereof the
undersigned, duly authorised thereto, have signed the present Agreement.
Done at New Delhi, in
duplicate, the 3rd day of April, 1956.
For the Government of
India For
the Government of United
Sd/- Kingdom
of Great Britain
Manilal C. Shah and
Northern Ireland.
Sd/-
Malcolm
McDonald
Convention between the
Government of the United States of America and the Government of the Republic
of India for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income
Notification No. 8786 [F.
No. 501/2/74-FTD], dated 20th December, 1990
G.S.R. 990(E).--Whereas
the annexed Convention between the Government of the United States of America
and the Government of the Republic of India for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income
has entered into force on the 18th December, 1990, after the notification by
both the Contracting States to each other of the completion of the procedures
required under their laws for bringing into force the said Convention in
accordance with paragraph 1 of article 30 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964, (7 of
1964) the Central Government hereby directs that all the provisions of the said
Convention shall be given effect to in the Union of India.
Further, in exercise of
the powers conferred by section 44A(b) of the Wealth-tax Act, 1957 (27 of 1957)
and section 44(b) of the Gift-tax Act, 1958 (18 of 1958), the Central
Government also directs that the provisions of article 28 of the said
Convention shall be given effect to in the Union of India.
Convention between the
Government of the United States of America and the Government of the Republic
of India for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income
The Government of the
United States of America and the Government of the Republic of India, desiring
to conclude a Convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income, have agreed as
follows:
ARTICLE 1 : General
scope.--1. This Convention shall apply to persons who are residents of one or
both of the Contracting States, except as otherwise provided in the Convention.
2. The Convention shall
not restrict in any manner any exclusion, exemption, deduction, credit or other
allowance now or hereafter accorded:
(a) by the laws of either Contracting State; or
(b) by any
other agreement between the Contracting States.
3. Notwithstanding any
provision of the Convention except paragraph 4, a Contracting State may tax its
residents (as determined under article 4 (Residence), and by reason of
citizenship may tax its citizens, as if the Convention had not come into
effect. For this purpose, the term "citizen" shall include a former
citizen whose loss of citizenship had as one of its principle purposes the
avoidance of tax, but only for a period of 10 years following such loss.
4. The provisions of
paragraph 3 shall not affect--
(a) the benefits conferred by a Contracting State under paragraph
2 of article 9 (Associated enterprises), under paragraphs 2 and 6 of article 20
(Private pensions, annuities, alimony and child support), and under articles 25
(Relief From Double Taxation), 26 (Non-Discrimination), and 27 (Mutual
Agreement Procedure); and
(b) the benefits conferred by a Contracting State under articles
19 (Remuneration and pensions in respect of Government service), 21 (payments
received by students and apprentices), 22 (Payments received by professors,
teachers and research scholars) and 29 (Diplomatic agents and consular
officers), upon individuals who are neither citizens of, nor have immigrant
status in, that State.
ARTICLE 2 : Taxes
covered.--1. The existing taxes to which this Convention shall apply are:
(a) in the United States, the federal income taxes imposed by the
Internal Revenue Code (but excluding the accumulated earnings tax, the personal
holding company tax, and social security taxes), and the excise taxes imposed
on insurance premiums paid to foreign insurers and with respect to private
foundations (hereinafter referred to as "United States tax");
provided, however, the Convention shall apply to the excise taxes imposed on
insurance premiums paid to foreign insurers only to the extent that the risks
covered by such premiums are not reinsured with a person not entitled to
exemption from such taxes under this or any other Convention which applies to
these taxes; and
(b) in India:
(i) the income-tax including any surcharge thereon, but
excluding income-tax on undistributed income of companies, imposed under the
Income-tax Act; and
(ii) the surtax.
(hereinafter referred to
as "Indian tax").
Taxes referred to in (a)
and (b) above shall not include any amount payable in respect of any default or
omission in relation to the above taxes or which represent a penalty imposed
relating to those taxes.
2. The Convention shall
apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or in place of,
the existing taxes. The competent authorities of the Contracting States shall
notify each other of any significant changes which have been made in their
respective taxation laws and of any official published material concerning the
application of the Convention.
ARTICLE 3 : General
definitions.--1. In this Convention, unless the context otherwise requires:
(a) the term "India" means the territory of India and
includes the territorial sea and airspace above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdictions, according to the Indian law and in accordance with international
law;
(b) the term "United States", when used in a
geographical sense, means all the territory of the United States of America,
including its territorial sea, in which the laws relating to United States tax
are in force, and all the area beyond its territorial sea, including the seabed
and subsoil thereof, over which the United States has jurisdiction in
accordance with international law and in which the laws relating to United
States tax are in force;
(c) the terms " a Contracting State" and "the
other Contracting State" mean India or the United States as the context
requires;
(d) the term "tax" means Indian tax or United States
tax, as the context requires;
(e) the term "person" includes an individual, an
estate, a trust, a partnership, a company, any other body of persons, or other
taxable entity;
(f) the term "company" means any body corporate or any
entity which is treated as a company or body corporate for tax purposes;
(g) the terms "enterprise of a Contracting State" and
"enterprise of the other Contracting State" mean respectively an
enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;
(h) the term "competent authority" means, in the case
of India, the Central Government in the Ministry of Finance (Department of
Revenue) or their authorized representative, and in the case of the United
States, the Secretary of the Treasury or his delegate;
(i) the term "national" means any individual
possessing the nationality or citizenship of a Contracting State;
(j) the term "international traffic" means any transport
by a ship or aircraft operated by an enterprise of a Contracting State, except
when the ship or aircraft is operated solely between places within the other
Contracting State;
(k) the term "taxable year" in relation to Indian tax
means "previous year" as defined in the Income-tax Act, 1961.
2. As regards the
application of the Convention by a Contracting State any term not defined
therein shall, unless the context otherwise requires or the competent
authorities agree to a common meaning pursuant to the provisions of article 27
(Mutual Agreement Procedure, have the meaning which it has under the laws of
that State concerning the taxes to which the Convention applies.
ARTICLE 4 : Residence.--1.
For the purposes of this Convention, the term "resident of a Contracting
State" means any person who under the laws of that State, is liable to tax
therein by reason of his domicile, residence, citizenship, place of management,
place of incorporation, or any other criterion of a similar nature, provided however,
that
(a) this term does not include any person who is liable to tax in
that State in respect only of income from sources in that State; and
(b) in the case of income derived or paid by a partnership,
estate, or trust, this term applies only to the extent that the income derived
by such partnership, estate, or trust is subject to tax in that State as the
income of a resident, either in its hands or in the hands of its partners or
beneficiaries.
2. Where by reason of the
provisions of paragraph 1, an individual is a resident of both Contracting
States, than his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he
has a permanent home available to him; if he has a permanent home available to
him in both States, he shall be deemed to be a resident of the State with which
his personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests
cannot be determined, or if he does not have a permanent home available to him
in either State, he shall be deemed to be a resident of the State in which he
has an habitual abode;
(c) if he has an habitual abode in both States or in neither of
them, he shall be deemed to be a resident of the State of which he is a
national;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting States shall settle the question by
mutual agreement.
3. Where, by reason of
paragraph 1, a company is a resident of both Contracting States, such company
shall be considered to be outside the scope of this Convention except for
purposes of paragraph 2 of article 10 (Dividends), article 26
(Non-discrimination), article 27 (Mutual agreement procedure), article 28
(Exchange of information and administrative assistance) and article 30 (Entry
into force).
4. Where, by reason of the
provisions of paragraph 1, a person other than an individual or a company is a
resident of both Contracting States, the competent authorities of the Contracting
States shall settle the question by mutual agreement and determine the mode of
application of the Convention to such person.
ARTICLE 5 : Permanent
establishment.--1. For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business through
which the business of an enterprise is wholly or partly carried on.
2. The term
"permanent establishment" includes especially:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry, or any other place of extraction of natural
resources;
(g) a
warehouse, in relation to a person providing storage facilities for others;
(h) a farm, plantation or other place where
agriculture, forestry, plantation or related activities are carried on;
(i) a store or premises used as a sales outlet;
(j) an installation or structure used for
the exploration or exploitation of natural resources, but only if so used for a
period of more than 120 days in any twelve-month period;
(k) a building site or construction,
installation or assembly project or supervisory activities in connection
therewith, where such site, project or activities (together with other such
sites, projects or activities, if any) continue for a period of more than 120
days in any twelve-month period;
(l) the furnishing of services, other than
included services as defined in article 12 (royalties and fees for included
services), within a Contracting State by an enterprise through employees or
other personnel, but only if:
(i) activities of that nature continue
within that State for a period or periods aggregating to more than 90 days
within any twelve-month period; or
(ii) the services are performed within that
State for a related enterprise [within the meaning of paragraph 1 of article 9
(associated enterprises)].
3. Notwithstanding the
preceding provisions of this article, the term "permanent
establishment" shall be deemed not to include any one or more of the
following:
(a) the use of facilities solely for the
purpose of storage, display, or occasional delivery of goods or merchandise
belonging to the enterprise;
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or occasional delivery;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise, or of
collecting information, for the enterprise;
(e) the maintenance of a fixed place of
business solely for the purpose of advertising, for the supply of information,
for scientific research or for other activities which have a preparatory or
auxiliary character, for the enterprise.
4. Notwithstanding the
provisions of paragraphs 1 and 2, where a person--other than an agent of an
independent status to whom paragraph 5 applies--is acting in a Contracting
State on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the
first-mentioned State, if:
(a) he has and habitually exercise in the
first-mentioned State an authority to conclude contracts on behalf of the
enterprise, unless his activities are limited to those mentioned in paragraph 3
which, if exercised through a fixed place of business, would not make that
fixed place of business a permanent establishment under the provisions of that
paragraph;
(b) he has no such authority but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the enterprise,
and some additional activities conducted in that State on behalf of the
enterprise have contributed to the sale of the goods or merchandise; or
(c) he habitually secures orders in the
first-mentioned State, wholly or almost wholly for the enterprise.
5. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent, or any other agent of an
independent status, provided that such persons are acting in the ordinary
course of their business. However, when the activities of such an agent are
devoted wholly or almost wholly on behalf of that enterprise and the
transactions between the agent and the enterprise are not made under
arm's-length conditions, he shall not be considered an agent of independent
status within the meaning of this paragraph.
6. The fact that a company
which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.
ARTICLE 6 : Income from
immovable property (real property).--1. Income derived by a resident of a Contracting
State from immovable property (real property), including income from
agriculture or forestry, situated in the other Contracting State may be taxed
in that other State.
2. The term
"immovable property" shall have the meaning which it has under the law
of the Contracting State in which the property in question is situated.
3. The provisions of
paragraph 1 shall also apply to income derived from the direct use, letting or
use in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
ARTICLE 7: Business
profits.--1. The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the
other Contracting State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only so much of them as is attributable to
(a) that permanent establishment; (b) sales in the other State of goods or
merchandise of the same or similar kind as those sold through that permanent
establishment; or (c) other business activities carried on in the other State
of the same or similar kind as those effected through that permanent
establishment.
2. Subject to the
provisions of paragraph 3, where an enterprise of a Contracting State carries
on business in the other Contracting State through a permanent establishment
situated therein, there shall in each Contracting State be attributed to that
permanent establishment the profits which it might be expected to make if it
were a distinct and independent enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly at arm's
length with the enterprise of which it is a permanent establishment and other
enterprises controlling, controlled by or subject to the same common control as
that enterprise. In any case where the correct amount of profits attributable
to a permanent establishment is incapable of determination or the determination
thereof presents exceptional difficulties, the profits attributable to the
permanent establishment may be estimated on a reasonable basis. The estimate
adopted shall, however, be such that the result shall be in accordance with the
principles contained in this article.
3. In the determination of
the profits of permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent
establishment, including a reasonable allocation of executive and general
administrative expenses, research and development expenses, interest, and other
expenses incurred for the purposes of the enterprise as a whole (or the part
thereof which includes the permanent establishment), whether incurred in the
State in which the permanent establishment is situated or elsewhere, in
accordance with the provisions of and subject to the limitations of the
taxation laws of that State. However, no such deduction shall be allowed in
respect of amounts, if any, paid (otherwise than towards reimbursement of
actual expenses) by the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties, fees or other
similar payments in return for the use of patents, know-how or other rights, or
by way of commission or other charges for specific services performed or for
management, or, except in the case of banking enterprises, by way of interest
on moneys lent to the permanent establishment. Likewise, no account shall be
taken, in the determination of the profits of a permanent establishment, for
amounts charged (otherwise than toward reimbursement of actual expenses), by
the permanent establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees or other similar payments in return
for the use of patents, know-how or other rights, or by way of commission or
other charges for specific services performed or for management, or, except in
the case of a banking enterprise, by way of interest on moneys lent to the head
office of the enterprise or any of its other offices.
4. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
5. For the purposes of
this Convention, the profits to be attributed to the permanent establishment as
provided in paragraph 1(a) of this article shall include only the profits
derived from the assets and activities of the permanent establishment and shall
be determined by the same method year by year unless there is good and
sufficient reason to the contrary.
6. Where profits include
items of income which are dealt with separately in other articles of the
convention, then the provisions of those articles shall not be affected by the
provisions of this article.
7. For the purposes of the
Convention, the term "business profits" means income derived from any
trade or business including income from the furnishing of services other than
included services as defined in article 12 (royalties and fees for included
services) and including income from the rental of tangible personal property
other than property described in paragraph 3(b) of article 12 (royalties and
fees for included services).
ARTICLE 8 : Shipping and
air transport.--1. Profits derived by an enterprise of a Contracting State from
the operation by that enterprise of ships or aircraft in international traffic
shall be taxable only in that State.
2. For the purposes of
this article, profits from the operation of ships or aircraft in international
traffic shall mean profits derived by an enterprise described in paragraph 1
from the transportation by sea or air respectively of passengers, mail,
livestock or goods carried on by the owners or lessees or charterers of ships
or aircraft including--
(a) the sale of tickets for such transportation on behalf of
other enterprises;
(b) other
activity directly connected with such transportation; and
(c) the rental of ships or aircraft
incidental to any activity directly connected with such transportation.
3. Profits of an
enterprise of a Contracting State described in paragraph 1 from the use,
maintenance, or rental of containers (including trailers, barges, and related
equipment for the transport of containers) used in connection with the
operation of ships or aircraft in international traffic shall be taxable only
in that State.
4. The provisions of
paragraphs 1 and 3 shall also apply to profits from participation in a pool, a
joint business, or an international operating agency.
5. For the purposes of
this article, interest on funds connected with the operation of ships or
aircraft in international traffic shall be regarded as profits derived from the
operation of such ships or aircraft, and the provisions of article 11
(Interest) shall not apply in relation to such interest.
6. Gains derived by an
enterprise of a Contracting State described in paragraph 1 from the alienation
of ships, aircraft or containers owned and operated by the enterprise, the
income from which is taxable only in that State, shall be taxed only in that
State.
ARTICLE 9 : Associated
enterprises.--1 Where:
(a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or capital of an
enterprise of the other Contracting State; or
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a
Contracting State and an enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which, but for those conditions would
have accrued to one of the enterprises, but by reason of those conditions have
not so accrued, may be included in the profits of that enterprise and taxed
accordingly.
2. Where a Contracting
State includes in the profits of an enterprise of that State, and taxes
accordingly, profits on which an enterprise of the other Contracting State has
been charged to tax in that other State, and the profits so included are
profits which would have accrued to the enterprise of the first-mentioned State
if the conditions made between the two enterprises had been those which would
have been made between independent enterprises, then that other State shall
make an appropriate adjustment to the amount of the tax charged therein on
those profits. In determining such adjustment, due regard shall be had to the
other provisions of this Convention and the competent authorities of the
Contracting States shall if necessary consult each other.
ARTICLE 10 :
Dividends.--1. Dividends paid by a company which is a resident of a Contracting
State to a resident of the other Contracting State may be taxed in that other
State.
2. However, such dividends
may also be taxed in the Contracting State of which the company paying the
dividends is a resident, and according to the laws of that State, but if the
beneficial owner of the dividends is a resident of the other Contracting State,
the tax so charged shall not exceed:
(a) 15 per cent of the gross amount of the
dividends if the beneficial owner is a company which owns at least 10 per cent.
of the voting stock of the company paying the dividends;
(b) 25 per
cent of the gross amount of the dividends in all other cases.
Sub-paragraph (b) and not
sub-paragraph (a) shall apply in the case of dividends paid by a United States
person which is a Regulated Investment Company. Sub-paragraph (a) shall not
apply to dividends paid by a United States person which is a Real Estate
Investment Trust, and sub-paragraph (b) shall only apply if the dividend is
beneficially owned by an individual holding a less than 10 per cent interest in
the Real Estate Investment Trust. This paragraph shall not affect the taxation
of the company in respect of the profits out of which the dividends are paid.
3. The term
"dividends" as used in this article means income from shares or other
rights, not being debt-claims, participating in profits, income from other
corporate rights which are subject to the same taxation treatment as income
from shares by the taxation laws of the State of which the company making the
distribution is a resident: and income from arrangements, including debt
obligations, carrying the right to participate in profits, to the extent so
characterised under the laws of the Contracting State in which the income
arises.
4. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other
Contracting State, of which the company paying the dividends is a resident,
through a permanent establishment situated therein or performs in that other
State independent personal services from a fixed base situated therein, and the
dividends are attributable to such permanent establishment or fixed base. In
such case the provisions of article 7 (Business Profits) or article 15
(Independent Personal Services), as the case may be shall apply.
5. Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company except in so far as such dividends are paid to a resident
of that other State or insofar as the holding in respect of which the dividends
are paid is effectively connected with a permanent establishment or a fixed
base situated in that other State, nor subject the company's undistributed
profits to a tax on the company's undistributed profits, even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income
arising in such other State.
ARTICLE 11 : Interest.--1.
Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest
may also be taxed in the Contracting State in which it arises, and according to
the laws of that State, but if the beneficial owner of the interest is a
resident of the other Contracting State, the tax so charged shall not exceed:
(a) 10 per cent of the gross amount of the interest if such
interest is paid on a loan granted by a bank carrying on a bona fide banking
business or by a similar financial institution (including an insurance
company); and
(b) 15 per cent of the gross amount of the interest in all other
cases.
3. Notwithstanding the
provisions of paragraph 2 of this article, interest arising in a Contracting
State:
(a) and derived and beneficially owned by the Government of the
other Contracting State, a political sub-division or local authority thereof,
the Reserve Bank of India, or the Federal Reserve Bank of the United States, as
the case may be, and such other institutions of either Contracting State as the
competent authorities may agree pursuant to article 27 (Mutual Agreement Procedure);
(b) with respect to loans or credits extended or endorsed:
(i) by the Export Import Bank of the United
States, when India is the first-mentioned Contracting State; and
(ii) by the EXIM Bank of India, when the
United States is the first-mentioned Contracting State; and
(c) to the extent approved by the Government of that State, and
derived and beneficially owned by any person, other than a person referred to
in sub-paragraphs (a) and (b), who is a resident of the other Contracting
State, provided that the transaction giving rise to the debt-claim has been
approved in this behalf by the Government of the first-mentioned Contracting
State;
shall be exempt from tax
in the first-mentioned Contracting State.
4. The term
"interest" as used in this Convention means income from debt-claims
of every kind, whether or not secured by mortgage, and whether or not carrying
a right to participate in the debtor's profits, and in particular, income from
government securities, and income from bonds or debentures, including premiums
or prizes attaching to such securities, bonds or debentures. Penalty charges
for late payment shall not be regarded as interest for the purposes of the
Convention. However, the term "interest" does not include income
dealt with in article 10 (Dividends).
5. The provisions of
paragraphs 2 and 3 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent establishment
situated therein, or performs in that other State independent personal services
from a fixed base situated therein, and
the interest is attributable to such permanent establishment or fixed
base. In such case the provisions of article 7 (Business Profits) or article 15
(Independent Personal Services, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself or a
political sub-division, local authority, or resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base, and such interest is borne by such permanent establishment or
fixed base, then such interest shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is situated.
7. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid exceeds the amount which would have been agreed
upon by the payer and the beneficial owner in the absence of such relationship,
the provisions of this article shall apply only to the last-mentioned amount.
In such case the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being had to the other
provisions of the Convention.
ARTICLE 12 : Royalties and
fees for included services.--1. Royalties and fees for included services
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State.
2. However, such royalties
and fees for included services may also be taxed in the Contracting State in
which they arise and according to the laws of that State; but if the beneficial
owner of the royalties or fees for included services is a resident of the other
Contracting State, the tax so charged shall not exceed:
(a) in the case of royalties referred to in sub-paragraph (a) of
paragraph 3 and fees for included services as defined in this article [other
than services described in sub-paragraph (b) of this paragraph]:
(i) during the first five taxable years for which this
Convention has effect,
(A) 15 per cent of the gross amount of the royalties or fees for
included services as defined in this article, where the payer of the royalties
or fees is the Government of that Contracting State, a political sub-division
or a public sector company; and
(B) 20 per cent of the gross amount of the royalties or fees for
included services in all other cases; and
(ii) during the subsequent years, 15 per cent
of the gross amount of royalties or fees for included services; and
(b) in the case of royalties referred to in sub-paragraph (b) of
paragraph 3 and fees for included services as defined in this article that are
ancillary and subsidiary to the enjoyment of the property for which payment is
received under paragraph 3(b) of this article, 10 per cent of the gross amount
of the royalties or fees for included services.
3. The term
"royalties" as used in this article means:
(a) payments of any kind received as consideration for the use
of, or the right to use, any copyright of a literary, artistic, or scientific
work, including cinematograph films or work on film, tape or other means of
reproduction for use in connection with radio or television broadcasting, any
patent, trademark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience,
including gains derived from the alienation of any such right or property which
are contingent on the productivity, use or disposition thereof; and
(b) payments of any kind received as consideration for the use
of, or the right to use, any industrial, commercial or scientific equipment,
other than payments derived by an enterprise described in paragraph 1 of
article 8 (Shipping and Air Transport) from activities described in paragraph
2(c) or 3 of article 8.
4. For purposes of this
article, "fees for included services" means payments of any kind to
any person in consideration for the rendering of any technical or consultancy
services (including through the provision of services of technical or other
personnel) if such services:
(a) are ancillary and subsidiary to the application or enjoyment
of the right, property or information for which a payment described in
paragraph 3 is received; or
(b) make available technical knowledge, experience, skill,
know-how, or processes, or consist of the development and transfer of a
technical plan or technical design.
5. Notwithstanding
paragraph 4, "fees for included services" does not include amounts
paid:
(a) for services that are ancillary and subsidiary, as well as
inextricably and essentially linked, to the sale of property other than a sale
described in paragraph 3(a);
(b) for services that are ancillary and subsidiary to the rental
of ships, aircraft, containers or other equipment used in connection with the
operation of ships or aircraft in international traffic;
(c) for teaching in or by educational institutions;
(d) for services for the personal use of the individual or
individuals making the payment; or
(e) to an employee of the person making the payments or to any
individual or firm of individuals (other than a company) for professional
services as defined in article 15 (Independent Personal Services).
6. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or
fees for included services, being a resident of a Contracting State, carries on
business in the other Contracting State, in which the royalties or fees for
included services arise, through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the royalties or fees for included services are
attributable to such permanent establishment or fixed base. In such case the
provisions of article 7 (Business Profits) or article 15 (Independent Personal
Services), as the case may be, shall apply.
7 (a) Royalties and fees
for included services shall be deemed to arise in a Contracting State when the
payer is that State itself, a political sub-division, a local authority, or a
resident of that State. Where, however, the person paying the royalties or fees
for included services, whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or a fixed base in connection
with which the liability to pay the royalties or fees for included services was
incurred, and such royalties or fees for included services are borne by such
permanent establishment or fixed base, then such royalties or fees for included
services shall be deemed to arise in the Contracting State in which the
permanent establishment or fixed base is situated.
(b) Where under
sub-paragraph (a) royalties or fees for included services do not arise in one
of the Contracting States, and the royalties relate to the use of, or the right
to use, the right or property, or the fees for included services relate to
services performed, in one of the Contracting States, the royalties or fees for
included services shall be deemed to arise in that Contracting State.
8. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties or fees for included
services paid exceeds the amount which would have been paid in the absence of
such relationship, the provisions of this article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of the Convention.
ARTICLE 13 :
Gains.--Except as provided in article 8 (Shipping and Air Transport) to this
Convention, each Contracting State may tax capital gains in accordance with the
provisions of its domestic law.
ARTICLE 14 : Permanent
establishment tax.--1. A company which is a resident of India may be subject in
the United States to a tax in addition to the tax allowable under the other
provisions of this Convention.
(a) Such tax, however, may be imposed only on:
(i) the portion of the business profits of the company subject
to tax in the United States which represents the dividend equivalent amount;
and
(ii) the excess, if any, of interest
deductible in the United States in computing the profits of the company that
are subject to tax in the United States and either attributable to a permanent
establishment in the United States or subject to tax in the United States under
article 6 (Income from Immovable Property [Real Property)], article 12
(Royalties and Fees for Included Services) as fees for included services, or
article 13 (Gains) of this Convention over the interest paid by or from the
permanent establishment or trade or business in the United States.
(b) For purposes of this article, business profits means profits
that are effectively connected (or treated as effectively connected) with the
conduct of a trade or business within the United States and are either
attributable to a permanent establishment in the United States or subject to
tax in the United States under article 6 (Income from Immovable Property (Real
Property), article 12 (Royalties and Fees for Included Services) as fees for
included services or article 13 (Gains) of this Convention.
(c) The tax referred to in sub-paragraph (a) shall not be imposed
at a rate exceeding:
(i) the rate specified in paragraph 2(a) of article 10
(Dividends) for the tax described in sub-paragraph (a)(i); and
(ii) the rate specified in paragraph 2(a) or
(b) (whichever is appropriate) of article 11 (Interest) for the tax described
in sub-paragraph (a)(ii).
2. A company which is a
resident of the United States may be subject to tax in India at a rate higher
than that applicable to the domestic companies. The difference in the tax rate
shall not, however, exceed the existing difference of 15 percentage points.
3. In the case of a
banking company which is a resident of the United States, the interest paid by
the permanent establishment of such a company in India to the head office may
be subject in India to a tax in addition to the tax imposable under the other
provisions of this Convention at a rate which shall not exceed the rate
specified in paragraph 2(a) of article 11 (Interest).
ARTICLE 15 : Independent
personal services.--1. Income derived by a person who is an individual or firm
of individuals (other than a company) who is a resident of a Contracting State
from the performance in the other Contracting State of professional services or
other independent activities of a similar character shall be taxable only in
the first-mentioned State except in the following circumstances when such
income may also be taxed in the other Contracting State:
(a) if such person has a fixed base regularly available to him in
the other Contracting State for the purpose of performing his activities, in
that case, only so much of the income as is attributable to that fixed base may
be taxed in that other State; or
(b) if the persons stay in the other Contracting State is for a
period or periods amounting to or exceeding in the aggregate 90 days in the
relevant taxable year.
2. The term
"professional services" includes independent scientific, literary,
artistic, educational or teaching activities as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants.
ARTICLE 16 : Dependent
personal services.--1. Subject to the provisions of articles 17 (Director's
Fees), 18 (Income Earned by Entertainers and Athletes), 19 (Remuneration and
Pensions in respect of Government Service), 20 (Private Pensions, Annuities, Alimony
and Child Support), 21 (Payments Received by Students and Apprentices and 22
(Payments Received by Professors, Teachers and Research Scholars), salaries,
wages and other similar remuneration derived by a resident of a Contracting
State in respect of an employment shall be taxable only in that State unless
the employment is exercised in the other Contracting State. If the employment
is so exercised, such remuneration as is derived therefrom may be taxed in that
other State.
2. Notwithstanding the provisions
of paragraph 1, remuneration derived by a resident of a Contracting State in
respect of an employment exercised in the other Contracting State shall be
taxable only in the first-mentioned State if:
(a) the recipient is present in the other
State for a period or periods not exceeding in the aggregate 183 days in the
relevant taxable year;
(b) the remuneration is paid by, or on
behalf of, an employer who is not a resident of the other State; and
(c) the remuneration is not borne by a
permanent establishment or a fixed base or a trade or business which the
employer has in the other State.
3. Notwithstanding the
preceding provisions of this article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operating in international
traffic by an enterprise of a Contracting State may be taxed in that State.
ARTICLE : 17 Directors
fees.--Director's fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE 18 : Income earned
by entertainers and athletes.--1. Notwithstanding the provisions of articles 15
(Independent Personal Services) and 16 (Dependant Personal Services), income
derived by a resident of a Contracting State as an entertainer, such as a
theatre, motion picture, radio or television artiste, or a musician, or as an
athlete, from his personal activities as such exercised in the other Contracting
State, may be taxed in that other State except where the amount of the net
income derived by such entertainer or athlete from such activities (after
deduction of all expenses incurred by him in connection with his visit and
performance) does not exceed one thousand five hundred United States dollars ($
1,500) or its equivalent in Indian rupees for the taxable year concerned.
2. Where income in respect
of activities exercised by an entertainer or an athlete in his capacity as such
accrues not to the entertainer or athlete but to another person, that income of
that other person may, notwithstanding the provisions of articles 7 (Business
Profits), 15 (Independent Personal Services) and 16 (Dependent Personal
Services), be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised unless the entertainer, athlete or other
person establishes that neither the entertainer or athlete nor persons related
thereto participate directly or indirectly in the profits of that other person
in any manner, including the receipt of deferred remuneration, bonuses, fees,
dividends, partnership distributions, or other distributions.
3. Income referred to in
the preceding paragraphs of this article derived by a resident of a Contracting
State in respect of activities exercised in the other Contracting State shall
not be taxed in that other State if the visit of the entertainers or athletes
to that other State is supported wholly or substantially from the public funds
of the Government of the first-mentioned Contracting State, or of a political
sub-division or local authority thereof.
4. The competent
authorities of the Contracting States may, by mutual agreement, increased the
dollar amounts referred to in paragraph 1 to reflect economic or monetary
developments.
ARTICLE 19 : Remuneration
and pensions in respect of government service.--1(a) Remuneration, other than a
pension paid by a Contracting State or a political sub-division or a local
authority thereof to an individual in respect of services rendered to that
State or sub-division or authority shall be taxable only in that State.
(b) However, such
remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of
that State who:
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension paid
by, or out of funds created by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However, such pension
shall be taxable only in that other Contracting State if the individual is a
resident of and a national of, that State.
3. The provisions of
article 16 (Dependant Personal Services), 17 (Directors' Fees) 18 (Income
Earned by Entertainers and Athletes) and 20 (Private Pensions, Annuities,
Alimony and Child Support) shall apply to remuneration and pensions in respect
of services rendered in connection with a business carried on by Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 20 : Private
pensions, annuities, alimony and child support.--1. Any pension, other than a
pension referred to in article 19 (Remuneration and Pensions in respect of
Government Service), or any annuity derived by a resident of a Contracting
State from sources within the other Contracting State may be taxed only in the
first-mentioned Contracting State.
2. Notwithstanding
paragraph 1, and subject to the provisions of article 19 (Remuneration and
Pensions in respect of Government Service), social security benefits and other
public pensions paid by a Contracting State to a resident of the other
Contracting State or a citizen of the United States shall be taxable only in
the first-mentioned State.
3. The term
"pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of
performance of services.
4. The term
"annuity" means stated sums payable periodically at stated times
during life or during a specified or ascertainable number of years, under an
obligation to make the payments in return for adequate and full consideration
in money or money's worth (but not for services rendered).
5. Alimony paid to a
resident of a Contracting State shall be taxable only in that State. The term
"alimony" as used in this paragraph means periodic payments made pursuant
to a written separation agreement or a decree of divorce, separate maintenance,
or compulsory support, which payments are taxable to the recipient under the
laws of the State of which he is a resident.
6. Periodic payments for
the support of a minor child made pursuant to a written separation agreement or
a decree of divorce, separate maintenance or compulsory support, paid by a
resident of a Contracting State to a resident of the other Contracting State
shall be taxable only in the first-mentioned State.
ARTICLE 21 : Payments
received by students and apprentices.--1. A student or business apprentice who
is or was a resident of one of the Contracting States immediately before
visiting the other Contracting State and who is present in that other State
principally for the purpose of his education or training shall be exempt from
tax in that other State, on payments which arise outside that other State for
the purposes of his maintenance, education or training.
2. In respect of grants,
scholarships and remuneration from employment not covered by paragraph 1, a
student or business apprentice described in paragraph 1 shall, in addition, be
entitled during such education or training to the same exemptions, reliefs or
reductions in respect of taxes available to residents of the State which he is
visiting.
3. The benefits of this
article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken.
4. For the purposes of
this article, an individual shall be deemed to be resident of a Contracting
State if he is resident in that Contracting State in the taxable year in which
he visits the other Contracting State or in the immediately preceding taxable
year.
ARTICLE 22 : Payments
received by professors, teachers and research scholars.--1. An individual who
visits a Contracting State for a period not exceeding two years for the purpose
of teaching or engaging in research at a university, college or other
recognised educational institution in that State, and who was immediately
before that visit a resident of the other Contracting State, shall be exempted
from tax by the first-mentioned Contracting State on any remuneration for such
teaching or research for a period not exceeding two years from the date he
first visits that State for such purpose.
2. This article shall
apply to income from research only if such research is undertaken by the
individual in the public interest and not primarily for the benefit of some
other private person or persons.
ARTICLE 23 : Other
income.--1. Subject to the provisions of paragraph 2, items of income of a
resident of a Contracting State, wherever arising, which are not expressly
dealt with in the foregoing articles of this Convention shall be taxable only in
that Contracting State.
2. The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of article 6 (Income from Immovable Property
(Real Property), if the beneficial owner of the income, being a resident of a
Contracting State, carries on business in the other Contracting State through a
permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the income
is attributable to such permanent establishment or fixed base. In such case,
the provisions of article 7 (Business Profits) or article 15 (Independent
Personal Services), as the case may be, shall apply.
3. Notwithstanding the
provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing articles of this Convention
and arising in the other Contracting State may also be taxed in that other
State.
ARTICLE 24 : Limitation on
benefits.--1. A person (other than an individual) which is a resident of a
Contracting State and derives income from the other Contracting State shall be
entitled under this Convention to relief from taxation in that other
Contracting State only if:
(a) more than 50 per cent of the beneficial interest in such
person (or in the case of a company, more than 50 per cent of the number of
shares of each class of the company's shares) is owned, directly or indirectly,
by one or more individual residents of one of the Contracting States, one of
the Contracting States or its political sub-divisions or local authorities, or
other individuals subject to tax in either Contracting State on their world
wide incomes, or citizens of the United States; and
(b) the income of such person is not used in substantial part,
directly or indirectly, to meet liabilities (including liabilities for interest
or royalties) to persons who are not residents of one of the Contracting
States, one of the Contracting State or its political sub-divisions or local authorities,
or citizens of the United States.
2. The provisions of
paragraph 1 shall not apply if the income derived from the other Contracting
State is derived in connection with, or is incidental to, the active conduct by
such person of a trade or business in the first-mentioned State (other than the
business of making or managing investments, unless these activities are banking
or insurance activities carried on by a bank or insurance company).
3. The provisions of
paragraph 1 shall not apply if the person deriving the income is a company
which is a resident of a Contracting State in whose principal class of shares
there is substantial and regular trading on a recognized stock exchange. For
purposes of the preceding sentence, the terms "recognized stock exchange"
means:
(a) in the case of the United States, the NASDAQ System owned by
the National Association of Securities Dealers, Incorporated and any stock
exchange registered with the Securities and Exchange Commission as a national
securities exchange for purposes of the Securities Act of 1934;
(b) in the case of India, any stock exchange which is recognised
by the Central Government under the Securities Contract Regulation Act, 1956;
and
(c) any other stock exchange agreed upon by the competent authorities
of the Contracting States.
4. A person that is not
entitled to the benefits of this Convention pursuant to the provisions of the
preceding paragraphs of the article may, nevertheless, be granted the benefits
of the Convention if the competent authority of the State in which the income
in question arises so determines.
ARTICLE 25 : Relief from
double taxation.--1. In accordance with the provisions and subject to the
limitations of the law of the United States (as it may be amended from time to
time without changing the general principle hereof), the United States shall
allow to a resident or citizen of the United States as a credit against the
United States tax on income:
(a) the income-tax paid to India by or on behalf of such citizen
or resident; and
(b) in the case of a United States company owning at least 10 per
cent of the voting stock of a company which is a resident of India and from
which the United States company receives dividends, the income-tax paid to
India by or on behalf of the distributing company with respect to the profits
out of which the dividends are paid.
For the purposes of this
paragraph, the taxes referred to in paragraphs 1(b) and 2 of article 2 (Taxes
Covered) shall be considered as income-taxes.
2. (a) Where a resident of
India derives income which, in accordance with the provisions of this
Convention, may be taxed in the United States, India shall allow as a deduction
from the tax on the income of that resident an amount equal to the income-tax
paid in the United States, whether directly or by deduction. Such deduction
shall not, however, exceed that part of the income-tax (as computed before the
deduction is given) which is attributable to the income which may be taxed in
the United States.
(b) Further, where such
resident is a company by which a surtax is payable in India, the deduction in
respect of income-tax paid in the United States shall be allowed in the first
instance from income-tax payable by the company in India and as to the balance,
if any, from surtax payable by it in India.
3. For the purposes of
allowing relief from double taxation pursuant to this article, income shall be
deemed to arise as follows:
(a) income derived by a resident of a Contracting State which may
be taxed in the other Contracting State in accordance with this Convention
(other than solely by reason of citizenship in accordance with paragraph 3 of
article 1 (General Scope) shall be deemed to arise in that other State;
(b) income derived by a resident of a Contracting State which may
not be taxed in the other Contracting State in accordance with the Convention
shall be deemed to arise in the first-mentioned State.
Notwithstanding the
preceding sentence, the determination of the source of income for purposes of
this article shall be subject to such source rules in the domestic laws of the
Contracting States as apply for the purpose of limiting the foreign tax credit.
The preceding sentence shall not apply with respect to income dealt with in
article 12 (Royalties and Fees for Included Services). The rules of this
paragraph shall not apply in determining credits against United States tax for
foreign taxes other than the taxes referred to in paragraphs 1(b) and 2 of
article 2 (Taxes Covered).
ARTICLE 26 :
Non-discrimination.--1. Nationals of Contracting State shall not be subjected
in the other Contracting State to any taxation or any requirement connected
therewith which is other or more burdensome than the taxation and connected
requirements to which nationals of that other State in the same circumstances
are or may be subjected. The provisions shall apply to persons who are not
resident of one or both of the Contracting States.
2. Except where the
provisions of paragraphs 3 of article 7 (Business Profits) apply, the taxation
on a permanent establishment which an enterprise of a Contracting State has in
the other Contracting State shall not be less favourably levied in that other
State than the taxation levied on enterprises of that other State carrying on
the same activities. This provision shall not be construed as obliging a
Contracting State to grant to residents of the other Contracting State any
personal allowance, reliefs, and reductions for taxation purposes on account of
civil status or family responsibilities which it grants to its own residents.
3. Except where the
provisions of paragraph 1 of article 9 (Associated Enterprises), paragraph 7 of
article 11 (Interest), or paragraph 8 of article 12 (Royalties and Fees for
Included Services) apply, interest, royalties and other disbursements paid by a
resident of a Contracting State to a resident of the other Contracting State
shall, for the purposes of determining the taxable profits of the
first-mentioned resident, be deductible under the same conditions as if they
had been paid to a resident of the first-mentioned State.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which other similar
enterprises of the first-mentioned State are or may be subjected.
5. Nothing in this article
shall be construed as preventing either Contracting State from imposing the
taxes described in article 14 (Permanent Establishment Tax) or the limitations
described in paragraph 3 of article 7 (Business Profits).
ARTICLE 27: Mutual
agreement procedure.--1. Where a person considers that the actions of one or
both of the Contracting States result or will result for him in taxation not in
accordance with the provisions of this Convention, he may, irrespective of the
remedies provided by the domestic law of those States, present his case to the
competent authority of the Contracting State of which he is a resident or
national. This case must be presented within three years of the date of receipt
of notice of the action which gives rise to taxation not in accordance with the
Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation which is not in accordance with the
Convention. Any agreement reached shall be implemented notwithstanding any time
limits or other procedural limitations in the domestic law of the Contracting
States.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Convention. They may also consult together for the
elimination of double taxation in cases not provided for a the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding paragraphs.
The competent authorities, through consultations, shall develop appropriate
bilateral procedure, conditions, methods and techniques for the implementation
of the mutual agreement procedure provided for in this article. In addition, a
competent authority may devise appropriate unilateral procedures, conditions,
methods and techniques to facilitate the above-mentioned bilateral actions and
the implementation of the mutual agreement procedure.
ARTICLE 28 : Exchange of
information and administrative assistance.--1. The competent authorities of the
Contracting States shall exchange such information (including documents) as is
necessary for carrying out the provisions of this Convention or of the domestic
laws of the Contracting States concerning taxes covered by the Convention
insofar as the taxation thereunder is not contrary to the Convention in
particular, for the prevention of fraud or evasion of such taxes. The exchange
of information is not restricted by article 1 (General Scope). Any information received
by a Contracting State shall be treated as secret in the same manner as
information obtained under the domestic laws of that State. However, if the
information is originally regarded as secret in the transmitting State, it
shall be disclosed only to persons or authorities (including courts and
administrative bodies) involved in the assessment, collection, or
administration of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Convention. Such persons or authorities shall use the information only for such
purposes, but may disclose the information in public court proceedings or in
judicial decisions. The competent authorities shall, through consultation,
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchange of information shall be made, including,
where appropriate, exchange of information regarding tax avoidance.
2. The exchange of
information or documents shall be either on a routine basis or on request with
reference to particular cases or otherwise. The competent authorities of the
Contracting States shall agree from time to time on the list of information or
documents which shall be furnished on a routine basis.
3. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:
(a) to carry out administrative measures at variance with the
laws and administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws
or in the normal course of the administration of that or of the other
Contracting State;
(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade process, or
information the disclosure of which would be contrary to public policy (order
public).
4. If information is
requested by a Contracting State in accordance with this article, the other
Contracting State shall obtain the information to which the request relates in
the same manner and in the same form as if the tax of the first-mentioned State
were the tax of that other State and were being imposed by that other State. If
specifically requested by the competent authority of a Contracting State, the
competent authority of the other Contracting State shall provide information
under this article in the form of depositions of witnesses and authenticated
copies of unedited original documents (including books, papers, statements,
records, accounts and writings), to the same extent such depositions and
documents can be obtained under the laws and administrative practices of that
other State with respect to its own taxes.
5. For the purposes of
this article, the Convention shall apply, notwithstanding the provisions of
article 2 (Taxes Covered):
(a) in the United States, to all taxes imposed under title 26 of
the United States Code; and
(b) in India, to the income-tax, the wealth-tax and the gift-tax.
ARTICLE 29 : Diplomatic agents
and consular officers.--Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under the general rules of
international law or under the provisions of special agreements.
ARTICLE 30 : Entry into
force.--1. Each Contracting State shall notify the other Contacting State in
writing, through diplomatic channels, upon the completion of their respective
legal procedures to bring this Convention into force.
2. The Convention shall
enter into force on the date of the latter of such notifications and its
provisions shall have effect:
(a) in the United States:
(i) in respect of taxes withheld at source,
for amounts paid or credited on or after the first day of January next
following the date on which the Convention enters into force;
(ii) in respect of other taxes, for taxable
periods beginning on or after the first day of January next following the date
on which the Convention enters into force; and
(b) in India, in respect of income arising in any taxable year
beginning on or after the first day of April next following the calendar year
in which the Convention enters into force.
ARTICLE 31 :
Termination.--This Convention shall remain in force indefinitely but either of
the Contracting States may, on or before the thirtieth day of June in any
calendar year beginning after the expiration of a period of five years from the
date of the entry into force of the Convention, give the other Contracting
State through diplomatic channels, written notice of termination and, in such
event, this Convention shall cease to have effect:
(a) in the United States
(i) in respect of taxes withheld at source,
for amounts paid or credited on or after the first day of January next
following the calendar year in which notice of termination is given; and
(ii) in respect of other taxes, for taxable
periods beginning on or after the first day of January next following the
calendar year in which the notice of termination is given; and
(b) in India, in respect of income arising in any taxable year
beginning on or after the first day of April next following the calendar year
in which the notice of termination is given.
In witness whereof, the
undersigned, being duly authorised by their respective Governments, have signed
this Convention.
Done at New Delhi in
duplicate, this 12th day of September, 1989, in the English and Hindi
languages, both texts being equally authentic. In case of divergence between
the two texts the English text shall be the operative one.
For the Government of the
Republic of India, For
the Government of the
(Sd.) N K Sengupta United
States of America,
Secretary to the
Government of India. (Sd.)
John R Hubbard, Ambassador.
At the signing today of
the Convention between the United States of America and the Republic of India
for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income, the undersigned have agreed upon the following
provisions, which shall form an integral part of the Convention:
I. Ad article 5 :
It is understood that
where an enterprise of a Contracting State has a permanent establishment in the
other Contracting State in accordance with the provisions of paragraphs 2(j),
2(k) or 2(1) of article 5 (Permanent Establishment), and the time period
referred to in that paragraph extends over two taxable years, a permanent
establishment shall not be deemed to exist in a year, if any, in which the use,
site, project or activity, as the case may be, continues for a period or
periods aggregating less than 30 days in that taxable year. A permanent
establishment will exist in the other taxable year, and the enterprise will be
subject to tax in that other Contracting State in accordance with the
provisions of article 7 (Business Profits), but only on income arising during
that other taxable year.
II. Ad article 7 :
Where the law of the
Contracting State in which a permanent establishment is situated imposes, in
accordance with the provisions of paragraph 3 of article 7 (Business Profits),
a restriction on the amount of executive and general administrative expenses
which may be allowed as a deduction in determining the profits of such
permanent establishment, it is understood that in making such a determination
of profits the deduction in respect of such executive and general
administrative expenses in no case shall be less than that allowable under the
Indian Income-tax Act as on the date of signature of this Convention.
III. Ad articles 7, 10, 11, 12, 15 and 23 :
It is understood that for
the implementation of paragraphs 1 and 2 of article 7 (Business Profits),
paragraph 4 of article 10 (Dividends), paragraph 5 of article 11 (Interest),
paragraph 6 of article 12 (Royalties and Fees for Included Services), paragraph
1 of article 15 (Independent Personal Services), and paragraph 2 of article 23
(Other Income), any income attributable to a permanent establishment or fixed
base during its existence is taxable in the Contracting State in which such
permanent establishment or fixed base is situated even if the payments are
deferred until such permanent establishment or fixed base has ceased to exist.
IV. Ad article 12 :
It is understood that fees
for included services, as defined in paragraph 4 of article 12 (Royalties and
Fees for Included Services) will, in accordance with United States law, be
subject to income tax in the United States based on net income and, when earned
by a company, will also be subject to the taxes described in paragraph 1 of
article 14 (Permanent Establishment Tax). The total of these taxes which may be
imposed on such fees, however, may not exceed the amount computed by
multiplying the gross fee by the appropriate tax rate specified in
sub-paragraph (a) or (b), whichever is applicable, of paragraph 2 of article
12.
V. Ad article 14 :
It is understood that
references in paragraph 1 of article 14 (Permanent Establishment tax) to
profits that are subject to tax in the United States under article 6 [Income
from Immovable Property (Real Property)], under article 12 (Royalties and Fees
for Included Services), as fees for included services as defined in that
article, or under article 13 (Gains) of this Convention, are intended to refer
only to cases in which the profits in question are subject to United States tax
based on net income (i.e., by virtue, of being effectively connected, or being
treated as effectively connected, with the conduct of a trade or business in
the United States). Any income which is subject to tax under those articles
based on gross income is not subject to tax under article 14.
In witness whereof, the
undersigned, being duly authorised by their respective Governments, have signed
this Protocol.
Done at New Delhi in
duplicate, this 12th day of September, 1989, in the English and Hindi
languages, both texts being equally authentic. In case of divergence between
the two texts, the English text shall be the operative one.
For the Government of the
Republic of India, For
the Government of the
(Sd.) N K Sengupta United
States of America,
Secretary to the Government
of India. (Sd.)
John R Hubbard, Ambassador.
Embassy of
United States of America
New Delhi, September 12,
1989
Excellency,
I have the honour to refer
to the Convention between the Government of the United States of America and
the Government of the Republic of India for the avoidance of double taxation
and the prevention of fiscal evasion with respect of taxes on income which was
signed today (hereinafter referred to as "the Convention") and to
confirm, on behalf of the Government of the United States of America, the
following understanding reached between the two Governments:
Both sides agree that a
tax sparing credit shall not be provided in article 25 (Relief from Double
Taxation) of the Convention at this time. However, the Convention shall be promptly
amended to incorporate a tax sparing credit provision if the United States
hereafter amends its laws concerning the provision of tax sparing credits, or
the United States reaches agreement on the provision of a tax sparing credit
with any other country.
Both sides also agree
that, for purposes of paragraph 4(c) of article 5 (Permanent Establishment) of
the Convention, a person shall be considered to habitually secure orders in a
Contracting State, wholly or almost wholly for an enterprise, only if:
1. such person frequently accepts orders for goods or
merchandise on behalf of the enterprise;
2. substantially all of such person's sales-related activities
in the Contracting State consist of activities for the enterprise;
3. such person habitually represents to persons offering to buy
goods or merchandise that acceptance of an order by such person constitutes the
agreement of the enterprise to supply goods or merchandise under the terms and
conditions specified in the order; and
4. the enterprise takes actions that give purchasers the basis
for a reasonable belief that such person has authority to bind the enterprise.
I have the honour to
request Your Excellency to confirm the foregoing understandings of Your
Excellency's Government.
Accept, Excellency, the
renewed assurances of my highest consideration.
His Excellency (Sd)
John R Hubbard,
Dr N K Sengupta, Ambassador.
Secretary (Revenue),
Ministry of Finance,
New Delhi
Secretary
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi, September 12,
1989
Excellency,
I have the honour to
acknowledge receipt of Your Excellency's Note of today's date, which reads as
follows:
I have the honour to refer
to the Convention between the Government of the United States of America and
the Government of the Republic of India for the avoidance of double taxation
and the prevention of fiscal evasion with respect to taxes on income which was
signed today (hereinafter referred to as "the Convention") and to
confirm, on behalf of the Government of the United States of America, the
following understandings reached between the two Governments:
Both sides agree that a
tax sparing credit shall not be provided in article 25 (Relief from Double
Taxation) of the Convention at this time. However, the Convention shall be
promptly amended to incorporate a tax sparing credit provision if the United
States hereafter amends its laws concerning the provision of tax sparing
credits, or the United States reaches agreement on the provision of a tax
sparing credit with any other country.
Both sides also agree
that, for purposes of paragraph 4(c) of article 5 (Permanent Establishment) of
the Convention, a person shall be considered to habitually secure orders in a
Contracting State, wholly or almost wholly for an enterprise, only if:
1. such person frequently accepts orders for goods or
merchandise on behalf of the enterprise;
2. substantially all of such person's sales-related activities
in the Contracting State consist of activities for the enterprise;
3. such person habitually represents to persons offering to buy
goods or merchandise that acceptance of an order by such persons constitutes
the agreement of the enterprise to supply goods or merchandise under the terms
and conditions specified in the order; and
4. the enterprise takes actions that give purchasers the basis
for a reasonable belief that such person has authority to bind the enterprise.
I have the honour to
confirm the understandings contained in your Excellency's note on behalf of the
Government of the Republic of India.
Accept, Excellency, the
renewed assurances of my highest consideration.
His Excellency (Sd.)
Dr John R Hubbard, N K Sengupta
Ambassador of the United
States of America
New Delhi
Embassy of the United
States of America
New Delhi, September 12,
1989
Excellency,
I have the honour to refer
to the Convention signed today between the United States of America and the
Republic of India for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and to inform you on behalf of
the United States of America of the following:
During the course of the
negotiations leading to conclusion of the Convention signed today, the
negotiators developed and agreed upon a memorandum of understanding intended to
give guidance both to the taxpayers and the tax authorities of our two
countries in interpreting aspects of article 12 (Royalties and Fees for
Included Services) relating to the scope of included services. This memorandum
of understanding represents the current views of the United States Government
with respect to these aspects of article 12, and it is my Government's
understanding that it also represents the current views of the Indian
Government. It is also my Government's view that as our Governments gain
experience in administering the Convention, and particularly article 12, the
competent authorities may develop and publish amendments to the memorandum of
understanding and further understandings and interpretations of the Convention.
If this position meets
with the approval of the Government of the Republic of India, this letter and
your reply thereto will indicate that our Governments share a common view of
the purpose of the memorandum of understanding relating to article 12 of the
Convention.
Accept, Excellency, the
renewed assurances of my highest consideration.
His Excellency (Sd.)
Dr. N K Sengupta, John
R Hubbard,
Secretary (Revenue), Ambassador.
Ministry of Finance,
New Delhi
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi, September 12,
1989
Excellency,
I have the honour to
acknowledge receipt of Your Excellency's Note of today's date, which reads as
follows:
"I have the honour to
refer to the Convention signed today between the United States of America and
the Republic of India for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and to inform you on behalf
of the United States of America of the following:
During the course of the
negotiations leading to conclusion of the Convention signed today, the
negotiators developed and agreed upon a memorandum of understanding intended to
give guidance both to the taxpayers and the tax authorities of our two
countries in interpreting aspects of article 12 (Royalties and Fees for
Included Services) relating to the scope of included services. This memorandum
of understanding represents the current views of the United States Government
with respect to these aspects of article 12, and it is my Government's
understanding that it also represents the current views of the Indian
Government. It is also my Government's view that as our Governments gain
experience in administering the Convention, and particularly article 12, the
competent authorities may develop and publish amendments to the memorandum of
understanding and further understandings and interpretations of the Convention.
If this position meets
with the approval of the Government of the Republic of India, this letter and
your reply thereto will indicate that our Governments share a common view of the purpose of the memorandum
of understanding relating to article 12 of the Convention."
I have the honour to
confirm the understandings contained in Your Excellency's Note, on behalf of the
Government of the Republic of India.
Accept, Excellency, the
renewed assurances of my highest consideration.
His Excellency (Sd.)
Dr John R Hubbard, N K
Sengupta
Ambassador of the
United States of America,
New Delhi.
US-INDIA TAX TREATY
May 15, 1989
Memorandum of
understanding concerning fees for included services in article 12
Paragraph 4 (in general)
This memorandum describes
in some detail the category of services defined in paragraph 4 of article 12
(Royalties and Fees for Included Services). It also provides examples of
services intended to be covered within the definition of included services and
those intended to be excluded, either because they do not satisfy the tests of
paragraph 4, or because, notwithstanding the fact that they meet the tests of
paragraph 4, they are dealt with under paragraph 5. The examples in either case
are not intended as an exhaustive list but rather as illustrating a few typical
cases. For ease of understanding, the examples in this memorandum describe US persons
providing services to Indian persons, but the rules of article 12 are
reciprocal in application.
Article 12 includes only
certain technical and consultancy services. By technical services, we mean in
this context services requiring expertise in a technology. By consultancy
services, we mean in this context advisory services. The categories of
technical and consultancy services are to some extent overlapping because a
consultancy service could also be a technical service. However, the category of
consultancy services also includes an advisory service, whether or not
expertise in a technology is required to perform it.
Under paragraph 4,
technical and consultancy services are considered included services only to the
following extent: (1) as described in paragraph 4(a), if they are ancillary and
subsidiary to the application or enjoyment of a right, property or information
for which a royalty payment is made; or (2) as described in paragraph 4(b), if
they make available technical knowledge, experience, skill, know-how, or
processes, or consist of the development and transfer of a technical plan or
technical design. Thus, under paragraph 4(b), consultancy services which are
not of a technical nature cannot be included services.
Paragraph 4(a)
Paragraph 4(a) of article
12 refers to technical or consultancy services that are ancillary and
subsidiary to the application or enjoyment of any right, property, or
information for which a payment described in paragraph 3(a) or (b) is received.
Thus, paragraph 4(a) includes technical and consultancy services that are
ancillary and subsidiary to the application or enjoyment of an intangible for
which a royalty is received under a licence or sale as described in paragraph
3(a), as well as those ancillary and subsidiary to the application or enjoyment
of industrial, commercial, or scientific equipment for which a royalty is
received under a lease as described in paragraph 3(b).
It is understood that, in
order for a service fee to be considered "ancillary and subsidiary" to
the application or enjoyment of some right, property, or information for which
a payment described in paragraph 3(a) or (b) is received, the service must be
related to the application or enjoyment of the right, property or information.
In addition, the clearly predominant purpose of the arrangement under which the
payment of the service fee and such other payment are made must be the
application or enjoyment of the right, property, or information described in
paragraph 3. The question of whether the service is related to the application
or enjoyment of the right, property, or information described in paragraph 3
and whether the clearly predominant purpose of the arrangement is such
application or enjoyment must be determined by reference to the facts and circumstances
of each case. Factors which may be relevant to such determination (although not
necessarily controlling) including:
1. the extent to which the services in question facilitate the
effective application or enjoyment of the right, property, or information
described in paragraph 3;
2. the extent to which such services are customarily provided
in the ordinary course of business arrangements involving royalties described
in paragraph 3;
3. whether the amount paid for the services (or which would be
paid by parties operating at arm's length) is an insubstantial portion of the
combined payments for the services and the rights, property, or information
described in paragraph 3;
4. whether the payment made for the services and the royalty
described in paragraph 3 are made under a single contract (or a set of related
contracts); and
5. whether the person performing the services is the same
person as, or a related person to, the person receiving the royalties described
in paragraph 3 (for this purpose, persons are considered related if their
relationship is described in article 9 (Associated Enterprises) or if the
person providing the service is doing so in connection with an overall
arrangement which includes the payer and recipient of the royalties).
To the extent that
services are not considered ancillary and subsidiary to the application or
enjoyment of some right, property, or information for which a royalty payment
under paragraph 3 is made, such services shall be considered "included
services" only to the extent that they are described in paragraph 4(b).
Example (1)
Facts
A US manufacturer grants
rights to an Indian company to use manufacturing processes in which the
transferor has exclusive rights by virtue of process patents or the protection
otherwise extended by law to the owner of a process. As part of the contractual
arrangement, the US manufacturer agrees to provide certain consultancy services
to the Indian company in order to improve the effectiveness of the latter's use
of the processes. Such services include, for example the provision of
information and advice on sources of supply for materials needed in the
manufacturing process, and on the development of sales and service literature,
for the manufactured product. The payments allocable to such services do not
form a substantial part of the total consideration payable under the
contractual arrangement. Are the payments for these services fees for
"included services"?
Analysis
The payments are fees for
included services. The services described in this example are ancillary and
subsidiary to the use of a manufacturing process protected by law as described
in paragraph 3(a) of article 12 because the services are related to the
application or enjoyment of the intangible and the granting of the right to use
the intangible is the clearly predominant purpose of the arrangement. Because
the services are ancillary and subsidiary to the use of the manufacturing
process, the fees for these services are considered fees for included services
under paragraph 4(a) of article 12, regardless of whether the services are
described in paragraph 4(b).
Example (2)
Facts
An Indian manufacturing
company produces a product that must be manufactured under sterile conditions
using machinery that must be kept completely free of bacterial or other harmful
deposits. A US company has developed a special cleaning process for removing
such deposits from that type of machinery. The US company enters into a
contract with the Indian company under which the former will clean the latter's
machinery on a regular basis. As part of the arrangement, the US company leases
to the Indian company a piece of equipment which allows the Indian company to
mesure the level of bacterial deposits on its machinery in order for it to know
when cleaning is required. Are the payments for the services fees for included
services?
Analysis
In this example, the
provision of cleaning services by the US company and the rental of the
monitoring equipment are related to each other. However, the clearly
predominant purpose of the arrangement is the provision of cleaning services.
Thus, although the cleaning services might be considered technical services,
they are not "ancillary and subsidiary" to the rental of the
monitoring equipment. Accordingly, the cleaning services are not "included
services" within the meaning of paragraph 4(a).
Paragraph 4(b)
Paragraph 4(b) of article
12 refers to technical or consultancy services that make available to the
person acquiring the service technical knowledge, experience skill, know-how,
or processes, or consist of the development and transfer of a technical plan or
technical design to such person. (For this purpose, the person acquiring the
service shall be deemed to include an agent nominee, or transferee of such
person). This category is narrower than the category described in paragraph
4(a) because it excludes any service that does not make technology available to
the person acquiring the service. Generally speaking, technology will be
considered "made available" when the person acquiring the service is
enabled to apply the technology. The fact that the provision of the service may
require technical input by the person providing the service does not per se
mean that technical knowledge, skills, etc., are made available to the person
purchasing the service, within the meaning of paragraph 4(b). Similarly, the
use of a product which embodies technology shall not per se be considered to
make the technology available.
Typical categories of
services that generally involve either the development and transfer of
technical plans or technical designs, or making technology available as
described in paragraph 4(b), include:
1. engineering services (including the sub-categories of
bio-engineering and aeronautical, agricultural, ceramics, chemical, civil,
electrical, mechanical, metallurgical and industrial engineering);
2. architectural services; and
3. computer software development.
Under paragraph 4(b),
technical and consultancy services could make technology available in a variety
of settings, activities and industries. Such services may, for example, relate
to any of the following areas:
1. bio-technical services;
2. food-processing;
3. environmental
and ecological services;
4. communication
through satellite or otherwise;
5. energy
conservation;
6. exploration
or exploitation of mineral oil or natural gas;
7. geological
surveys;
8. scientific
services; and
9. technical
training.
The following examples
indicate the scope of the conditions in paragraph 4(b):
Example (3)
Facts
A US manufacturer has
experience in the use of a process for manufacturing wall board for interior
walls of houses which is more durable than standard products of its type. An
Indian builder wishes to produce this product for its own use. It rents a plant
and contracts with the US company to send experts to India to show engineers in
the Indian company how to produce the extra-strong wall board. The US
contractors work with the technicians in the Indian firm for a few months. Are
the payments to the US firm considered to be payments for "included
services"?
Analysis
The payments would be fees
for included services. The services are of a technical or consultancy nature;
in the example, they have elements of both types of services. The services make
available to the Indian company technical knowledge, skill and processes.
Example (4)
Facts
A US manufacturer operates
a wall board fabrication plant outside India. An Indian builder hires the US
company to produce wall board at that plant for a fee. The Indian company
provides the raw materials and the US manufacturer fabricates the wall board in
its plant, using advanced technology. Are the fees in this example payments for
included services?
Analysis
The fees would not be for
included services. Although the US company is clearly performing a technical
service no technical knowledge, skill, etc., are made available to the Indian
company, nor is there any development and transfer of a technical plan or
design. The US company is merely performing a contract manufacturing service.
Example (5)
Facts
An Indian firm owns
inventory control software for use in its chain of retail outlets throughout
India. It expands its sales operation by employing a team of travelling
salesmen to travel around the countryside selling the company's wares. The
company wants to modify its software to permit the salesmen to assess the
company's central computers for information on what products are available in
inventory and when they can be delivered. The Indian firm hires a US computer
programming firm to modify its software for this purpose. Are the fees which
the Indian firm pays treated as fees for included services?
Analysis
The fees are for included
services. The US company clearly performs a technical service for the Indian
company, and it transfers to the Indian company the technical plan (i.e., the
computer program) which it has developed.
Example (6)
Facts
An Indian vegetable oil
manufacturing company wants to produce a cholesterol-free oil from a plant
which produces oil normally containing cholesterol. An American company has
developed a process for refining the cholesterol out of the oil. The Indian
company contracts with the US company to modify the formulas which it uses so
as to eliminate the cholesterol, and to train the employees of the Indian
company in applying the new formulas. Are the fees paid by the Indian company
for included services?
Analysis
The fees are for included
services. The services are technical, and the technical knowledge is made
available to the Indian company.
Example (7)
Facts
The Indian vegetable oil
manufacturing firm has mastered the science of producing cholesterol-free oil
and wishes to market the product world-wide. It hires an American marketing
consulting firm to do a computer simulation of the world market for such oil
and to advise it on marketing strategies. Are the fees paid to the US company
for included services?
Analysis
The fees would not be for
included services. The American company is providing a consultancy service
which involves the use of substantial technical skill and expertise. It is not,
however, making available to the Indian company and technical experience,
knowledge or skill, etc., nor is it transferring a technical plan or design.
What is transferred to the Indian company through the service contract is
commercial information. The fact that technical skills were required by the
performer of the service in order to perform the commercial information service
does not make the service a technical service within the meaning of paragraph
4(b).
Paragraph 5
Paragraph 5 of article 12
describes serveral categories of services which are not intended to be treated
as included services even if they satisfy the tests of paragraph 4. Set forth
below are example of cases where fees would be included under paragraph 4, but
are excluded because of the conditions of paragraph 5.
Example (8)
Facts
An Indian company
purchases a computer from a US computer manufacturer. As part of the purchase
agreement, the manufacturer agrees to assist the Indian company in setting up
the computer and installing the operating system, and to ensure that the staff
of the Indian company is able to operate the computer. Also, as part of the
purchase agreement, the seller agrees to provide, for a period of ten years,
any updates to the operating system and any training necessary to apply the
update. Both of these service elements to the contract would qualify under
paragraph 4(b) as an included service. Would either or both be excluded from
the category of included services, under paragraph 5(a), because they are
ancillary and subsidiary, as well as inextricably and essentially linked, to
the sale of the computer ?
Analysis
The installation
assistance and initial training are ancillary and subsidiary to the sale of the
computer, and they are also inextricably and essentially linked to the sale.
The computer would be of little value to the Indian purchaser without these
services, which are most readily and usefully provided by the seller. The fees
for installation assistance and initial training, therefore, are not fees for
included services, since these services are not the predominant purpose of the
arrangement.
The services of updating
the operating system and providing associated necessary training may well be
ancillary and subsidiary to the sale of computer, but they are not inextricably
and essentially linked to the sale. Without the updates, the computer will
continue to operate as it did when purchased, and will continue to accomplish
the same functions. Acquiring the updates, cannot, therefore, be said to be
inextricably and essentially linked to the sale of the computer.
Example (9)
Facts
An Indian hoospital
purchases an X-ray machine from a US manufacturer. As part of the purchase
agreement, the manufacturer agrees to install the machine, to perform an
initial inspection of the machine in India, to train hospital staff in the use
of the machine, and to service the machine periodically during the usual
warranty period (2 years). Under an optional service contract purchased by the
hospital, the manufacturer also agrees to perform certain other services
throughout the life of the machine, including periodic inspections and repair
services, advising the hospital about developments in X-ray film or techniques
which could improve the effectiveness of the machine, and training hospital
staff in the application of those new developments, the cost of the initial
installation, inspection, training and warranty service is relatively minor as
compared with the cost of the X-ray machine. Its any of the services described
here ancillary and subsidiary, as well as inextricably and essentially linked,
to the sale of the X-ray machine?
Analysis
The initial installation,
inspection and training services in India and the periodic service during the
warranty period are ancillary and subsidiary, as well as inextricably and
essentially linked, to the sale of the X-ray machine because the usefulness of
the machine to the hospital depends on this service, the manufacturer has full
responsibility during this period, and the cost of the services is a relatively
minor component of the contract. Therefore, under paragraph 5(a) these fees are
not fees for included services, regardless of whether they otherwise would fall
within paragraph 4(b).
Neither the post-warranty
period inspection and repair services, nor the advisory and training services
relating to new developments are "inextricably and essentially
linked" to the initial purchase of the X-ray machine. Accordingly, fees
for these services may be treated as fees for included services if they meet
the tests of paragraph 4(b).
Example (10)
Facts
An Indian automobile
manufacturer decides to expand into the manufacture of helicopters. It sends a group
of engineers from its design staff to a course of study conducted by the
Massachusetts Institute of Technology (MIT) for two years to study aeronautical
engineering. The Indian firm pays tuition fees to MIT on behalf of the firm's
employees. It is the tuition fee a fee for an included service within the
meaning of article 12 ?
Analysis
The tuition fee is clearly
intended to acquire a technical service for the firm. However, the fee paid is
for teaching by an education institution, and is, therefore under paragraph
5(c), not an included service. It is irrelevant for this purpose whether MIT
conducts the course on its campus or at some other location.
Example (11)
Facts
As in example (10), the
automobile manufacturer wishes to expand into the manufacture of helicopters.
It approaches an Indian university about establishing a course of study in
aeronautical engineering. The university contracts with a US helicopter
manufacturer to send an engineer to be a visiting professor of aeronautical
engineering on its faculty for a year. Are the amounts paid by the university
for these teaching services fees for included services?
Analysis
The fees are for teaching
in an educational institution. As such, pursuant to paragraph 5(c), they are
not fees for included services.
Example (12)
Facts
An Indian wishes to instal
a computerized system in his home to control lighting, heating and air
conditioning, a stereo sound system and a burglar and fire alarm system. He
hires an American electrical engineering firm to design the necessary wiring
system, adapt standard software, and provide instructions for installations.
Are the fees paid to the American firm by the Indian individual fees for
included services?
Analysis
The services in respect of
which the fees are paid are of the type which would generally be treated as
fees for included services under paragraph 4(b). However, because the services
are for the personal use of the individual making the payment, under paragraph
5(d), the payments would not be fees for included services.
Agreement between the Government of India and the Government of the United States of America through exchange of letters for the avoidance of double taxation of income of enterprises operating aircraft
Notification No. 1564 [F. No. 501/2/74-FTD], dated 26 November, 1976
G.S.R. 899(E).--Whereas
the Government of India and the Government of the United States of America have
concluded an Agreement through exchange of letters as set out in the Annexure
hereto, for the avoidance of double taxation of income of enterprises operating
aircraft;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964),
the Central Government hereby directs that all the provisions of the said
Agreement shall be given effect to in the Union of India.
Embassy of the United
States of
America, New Delhi,
November 26, 1976
Excellency,
I have the honour to refer
to the conversations which were recently conducted between representatives of
the Government of the United States of America and the representatives of the
Government of India relating to the possibility of concluding an Agreement
between the two Governments with a view to granting the international airlines
of the two countries exemption from tax on their earnings on the basis of
reciprocity, and to inform you that the Government of the United States of
America agrees as follows:
(1) The Government of the
United States of America shall on the basis of reciprocal exemption granted by
the Government of India to citizens of the United States of America and to
corporations organized in the United States of America, exclude from gross
income and exempt from income-tax all earnings derived
(a) by a corporation organised in India, or
(b) by an
individual who is:
(i) a citizen of India, and
(ii) a
non-resident alien as to the United States of America,
from the operation of
aircraft in international traffic. For this purpose, the term "operation
of aircraft" shall mean the business of transportation by air of persons,
livestock, goods or mail, carried on by the owners or lessees or charterers of
aircraft, including the sale of tickets for such transportation on behalf of
other enterprises, the incidental lease of aircraft and any other activity
directly connected with such transportation.
The exemption herein
provided shall also apply in respect of participation in pools of any kind
regarding air transport.
For the removal of doubts,
it is clarified that interest on funds connected with the operation of aircraft
in international traffic shall be regarded as income from the operation of such
aircraft.
(2) This Agreement shall
be applicable with respect to taxable years beginning on or after the first day
of January, 1976.
(3) Either of the two
Governments may terminate this Agreement by giving to the other Government six
months prior notice of termination in writing and, in such event, the Agreement
shall cease to be effective for the taxable years beginning on or after the
first day of January next following the expiration of the six months period.
(4) The Government of the
United States of America will consider this Note, together with your reply
confirming that the Government of India agrees to terms corresponding to those
outlines, above, as constituting an Agreement between the two Governments,
entering into force on the date of your reply.
I avail myself of this
opportunity to renew to Your Excellency the assurance of my highest
consideration.
(Sd.) David T. Schneider
Charge d' Affaires ad
interim
His Excellency
Shri S.R. Mehta,
Additional Secretary to
the Government of India
Government of India
Department of Revenue and
Banking
New Delhi
November 26, 1976
Excellency,
I have the honour to
acknowledge the receipt of Your Excellency's Note of today's date which reads
as follows:
"I have the honour to
refer to the conversations which were recently conducted between
representatives of the Government of the United States of America and the
representatives of the Government of India relating to the possibility of
concluding an Agreement between the two Governments with a view to granting the
international airlines of the two countries exemption from tax on their
earnings on the basis of reciprocity, and to inform you that the Government of
the United States of America agrees as follows:
(1) The Government of the
United States of America shall, on the basis of reciprocal exemption granted by
the Government of India to citizens of the United States of America and to
corporations organized in the United States of America exclude from gross
income and exempt from income-tax all earnings derived
(a) by a corporation organized in India, or
(b) by an individual who is,
(i) a citizen of India, and,
(ii) a
non-resident alien as to the United States of America,
from the operation of
aircraft in international traffic. For this purpose, the term "operation
or aircraft" shall mean the business of transportation by air of persons,
livestock goods or mail, carried on by the owners or lessees or charterers of
aircraft, including the sale of tickets for such transportation on behalf of
other enterprises, the incidental lease of aircraft and any other activity directly
connected with such transportation.
The exemption herein
provided shall also apply in respect of participation in pools of any kind
regarding air transport.
For the removal of doubts,
it is clarified that interest on funds connected with the operation of aircraft
in international traffic shall be regarded as income from the operation of such
aircraft.
(2) This Agreement shall
be applicable with respect to taxable years beginning on or after the first day
of January, 1976.
(3) Either of the two Governments
may terminate this Agreement by giving to the other Government six months prior
notice of termination in writing and, in such event, the Agreement shall cease
to be effective for the taxable years beginning on or after the first day of
January next following the expiration of the six months period.
(4) The Government of the
United States of America will consider this Note, together with your reply
confirming that the Government of India agrees to terms corresponding to those
outlined above, as constituting an agreement between the two Governments
entering into force on the date of your reply."
I have the honour to
confirm that the Government of India agrees, on the basis of reciprocity to
grant exemption from income-tax and surtax on income derived:
(a) by a corporation organized in the United States of America,
or
(b) by an individual who is:
(i) a citizen of the United States of
America; and
(ii) non-resident
in India
from the operation of
aircraft in international traffic. The term "taxable year" in
relation to India shall mean "previous year" as defined in the
Income-tax Act, 1961 (43 of 1961).
I have further the honour
to confirm on behalf of the Government of India the understandings outlined in
Our Excellency's Note and to agree that Your Excellency's Note and my reply
thereto shall constitute an Agreement between the two Governments.
I avail myself of this
opportunity to renew to Your Excellency the assurances of my highest
consideration.
His Excellency Mr. David T. Schneider (Sd-)
Charge d' Affaires S.R.
Mehta
Embassy of the United
States of Additional Secretary to
America, New Delhi the Government of India
Agreement with the Government of United States of America modifying the agreement for the avoidance of double taxation of income of enterprises operating aircraft
G.S.R. 223(E).--Whereas
the Government of India and the Government of the United States of America have
concluded an Agreement through exchange of letters as set out in the Annexure
hereto for the modification of the Agreement entered into by the said
Governments, for the avoidance of double taxation of income of enterprises
operating aircraft;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964) the Central Government hereby directs that the provisions of the said
Agreement shall be given effect to in the Union of India.
ANNEXURE
Embassy of the United
States of America
New Delhi, India
December 27, 1976
Mr. S. R. Mehta, Chairman,
Central Board of Direct
Taxes,
Ministry of Finance,
North Block,
New Delhi,
Dear Mr. Mehta,
On November 26, 1976 we
exchanged letters concerning a reciprocal airline tax exemption. In this
connection the text of the U.S. Note does not make a specific reference to the
aircraft registration requirement contained in sections 872(b)(2) and 883(a)(2)
of the U.S. Internal Revenue Code of 1954, as amended, though it had been
intended that these requirements be covered by the Note.
For this reason we wish by
this letter, to confirm the U.S. statutory requirement that the aircraft,
income from the operation of which is exempt from U.S. income-tax, be
registered in India, which grants an
equivalent exemption to U.S. corporations and to U.S. citizens non-resident in
India in respect of income from the operation of aircraft registered in the
United States.
I would be most grateful
if you would kindly confirm this letter so as to meet the statutory
requirements of the U.S. Internal Code.
Sincerely,
Sd./-
(David T. Schneider
Charge d' Affaires ad
interim
S. R. Mehta,
Chairman
Central Board of
Direct Taxes
New Delhi, the 29th December,
1976
Dear Mr. Schneider,
This is to acknowledge
receipt of your letter dated December 27, 1976, regarding the Agreement between
the Government of India and the Government of United States of America for the
avoidance of double taxation of income of the international airlines of the two
countries and to confirm the text of your letter which reads as follows:--
"On November 26, 1976
we exchanged letters concerning a reciprocal airline tax exemption. In this
connection the text of the U.S. Note does not make a specific reference to the
aircraft registration requirement contained in section 872(b)(2) and 883(a)(2)
of the U.S. Internal Revenue Code of 1954, as amended, though it had been
intended that these requirements be covered by the Note."
"For this reason we
wish, by this letter to confirm the U.S. statutory requirement that the
aircraft, income from the operation of which is exempt from U.S. income-tax be
registered in India, which grants an equivalent exemption to U.S. corporations
and to U.S. citizens non-resident in India, in respect of income from the
operation of aircraft registered in the United States."
"I would be most
grateful if you would kindly confirm this letter so as to meet the statutory
requirement of the U.S. Internal Code."
Yours sincerely
Sd./-
(S.R. Mehta)
H.E. Mr. David T.
Schneider,
Charge d' Affaires ad
interim,
Embassy of the U.S.A.
New Delhi
Agreement between India and the U.S.A. for the avoidance of double taxation of income of enterprises operating ships and aircrafts
G.S.R. 626(E).--Whereas
the annexed Agreement through exchange of letters between the Government of
India and the Government of the United States of America for the avoidance of
double taxation of income of enterprises operating ships and aircraft has
entered into force on the 12th April, 1989, the date of signature thereon by
the Contracting States;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that all the provisions of the
said Agreement shall be given effect to in the Union of India.
ANNEXURE
Embassy of the United
States of
America, New Delhi
April 12,1989
Excellency,
I have the honour to
propose that the Government of the United States of America and the Government
of India conclude an Agreement to exempt from income-tax, on a reciprocal
basis, income derived by residents of the other country from the international
operation of ships and aircraft. The terms of the Agreement are as follows:
The Government of the
United States of America, in accordance with sections 872(b) and 883(a) of the
Internal Revenue Code, agrees to exempt from tax gross income derived from the
international operation of ships or aircraft by individuals who are residents
of India (other than U.S. citizens) and corporations organized in India. This
exemption is granted on the basis of equivalent exemptions granted by India to
citizens of the United States (who are not residents of India) and to
corporations organised in the United States (which are not subject to tax by
India on the basis of residence).
In the case of a
corporation, the exemption shall apply only if the corporation meets either of
the following conditions:
(1) more than 50 per cent
of the value of the corporation's stock is owned, directly or indirectly by
individuals who are residents of India or of another country which grants a
reciprocal exemption to U.S. citizens and corporations; or
(2) the corporation's
stock is primarily and regularly traded on an established securities market in
India or is wholly owned by a corporation whose stock is so traded and which is
also organized in India.
For purposes of sub-paragraph
(1), the Government of India will be treated as an individual resident of
India. For purposes of the exemption from U.S. tax, sub-paragraph (1) will be
considered to be satisfied if the corporation is a "controlled foreign
corporation" under the Internal Revenue Code.
Gross income includes all
income derived from the international operation of ships or aircraft, including
income from the rental of ships or aircraft on a full (time or voyage)
basis. It also includes income from the
rental on a bareboat basis of ships and aircraft used in international
transport, income from the rental of containers and related equipment used in
international transport, and gain on the disposition of ships or aircraft,
provided in each case that the income is incidental to the international
operation of ships or aircraft. Gross income from the international operation
of ships or aircraft also includes income derived from participation in a pool,
a joint business, or an international operating agency and interest on funds
connected with the international operation of ships or aircraft.
The Government of the
United States of America considers that this Note, together with your Reply
Note confirming that the Government of India agrees to these terms, constitutes
an Agreement amending the agreement of November 26, 1976 and the exchange of
letters of December 27 and 29, 1976. This Agreement shall enter into force on
the date of your Reply Note and shall have effect with respect to taxable years
beginning on or after January, 1, 1987.
Either Government may
terminate this agreement by giving written notice of termination through
diplomatic channels.
I avail myself of this
opportunity to renew to your Excellency the assurances of my highest
consideration.
John R. Hubbard
Ambassador
His Excellency
Dr. N.K. Sengupta
Secretary (Revenue)
Ministry of Finance
Government of India.
Government of India,
Ministry of Finance,
Department of Revenue,
New Delhi
April 12, 1989
Excellency,
I have the honour to
acknowledge receipt of your Note of today's date proposing the terms of a
reciprocal exemption from income-tax of income derived from the international
operation of ships and aircraft.
The Government of India
agrees to exempt from income-tax gross income derived from the international
operation of ships or aircraft by U. S. citizens (who are not residents of
India) and corporations organized in the United States (other than corporations
which are subject to tax by India on the basis of residence).
In the case of a
corporation, the exemption shall apply only if the corporation meets either of
the following conditions.--
(1) more than 50 per cent
of the value of the corporation's stock is owned, directly or indirectly, by
individuals who are citizens of the United States or residents of another
country which grants a reciprocal exemption to Indian residents and
corporation; or
(2) the corporation's
stock is primarily and regularly traded on an established securities market in
the United States, or is wholly owned by a corporation whose stock is so traded
and which is also organized in the United States.
Gross income includes all
income derived from the international operation of ships or aircraft, including
income from the rental of ships or aircraft on a full (time or voyage) basis.
It also includes income from the rental on a bareboat basis of ships and
aircraft used in international transport, income from the rental of containers
and related equipment used in international transport, and gain on the
disposition of ships or aircraft, provided in each case that the income is
incidental to the international operation of ships or aircraft. Gross income
from the international operation of ships or aircraft also includes income
derived from participation in a pool, a joint business or an international
operating agency and interest on funds connected with the international
operation of ships or aircraft.
I am pleased to confirm
that Your Excellency's Note and this Reply Note constitute an agreement between
the two Governments amending the Agreement of November 26, 1976, and the
exchange of letters of December 27 and 29, 1976. This Agreement shall enter
into force on today's date and shall have effect with respect to previous years
beginning on or after January 1, 1987.
Either Government may
terminate this Agreement by giving written notice of termination through
diplomatic channels.
I avail myself of this
opportunity to renew to Your Excellency the assurances of my highest
consideration.
N.K. Sengupta
Secretary (Revenue)
His Excellency
DR. John R. Hubbard
Ambassador
United States Embassy
New Delhi.
Agreement between the
Government of the Republic of India and the Government of the Republic of
Uzbekistan for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on Income and on Capital
Notification No. 10222 [F.
No. 501/8/92-FTD], dated 13-11-1996
Whereas the annexed
Agreement between the Government of the Republic of India and the Government of
the Republic of Uzbekistan for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital has
entered into force on the 25th January, 1994 on the notification by both the
Contracting States to each other of the completion of the procedures required
under their laws for the bringing into force of the said Agreement in
accordance with Article 30 of the said Agreement.
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central
Government hereby directs that all the provisions of the said Agreement shall
be given effect to in the Union of India.
The Government of the
Republic of India and the Government of the Republic of Uzbekistan, Desiring to
conclude an Agreement for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and on capital:
Have Agreed as follows:
Article 1
Personal scope
This Agreement shall apply
to persons who are residents of one or both of the Contracting States.
Article 2
Taxes covered
1. The taxes to which this
Agreement shall apply are:
(a) in Uzbekistan:
(i) the taxes on profit;
(ii) the
wealth-tax;
(iii) the
income-tax on legal persons as well as individuals;
(hereinafter referred to
as "Uzbekistan tax")
(b) in India:
(i) the income-tax including any surcharge thereon;
(ii) the
wealth-tax;
(hereinafter referred to
as "Indian tax")
2. The present Agreement
shall also apply to any identical or substantially similar taxes which are
imposed by either Contracting State after the date of signature of the present
Agreement in addition to, or in place of, the taxes referred to in paragraph 1.
The competent authorities of the Contracting States shall notify each other of
any substantial changes which are made in their respective taxation laws.
Article 3
General definitions
1. In this Agreement,
unless the context otherwise requires:
(a) the term "India" means the territory of India and
includes the territorial sea and airspace above it, and other maritime zones in
which India has sovereign rights, other rights and jurisdictions, according to
the Indian law and in accordance with International Law;
(b) the term "Uzbekistan" means in geographical sense
land, territorial waters, and other zones in which Uzbekistan has sovereign
rights, other rights and jurisdictions, according to the International Law and
tax laws of the Republic of Uzbekistan;
(c) the terms "Contracting State" and "the other
Contracting State" mean Uzbekistan or India as the context requires;
(d) the term "company" means any body corporate or any
entity which is treated as a company or body corporate under the taxation laws
in force in the respective Contracting States;
(e) the term "competent authority" means in the case of
Uzbekistan, Central State Taxation Board; and in the case of India, the Central
Government in the Ministry of Finance (Department of Revenue) or their
authorized representative;
(f) the terms "enterprise of a Contracting State" and
"enterprise of the other Contracting State" mean respectively an
enterprise carried on by a resident of a Contracting State and enterprise
carried on by a resident of the other Contracting State;
(g) the term "fiscal year" means:
(i) in the case of Uzbekistan, calender
year from 1 of January to 31 of December of the year under review,
(ii) in the
case of India, "previous year" as defined under section 3 of the
Income-tax Act, 1961;
(h) the term "international traffic" means any
transport by a ship, aircraft or motor vehicles operated by an enterprise of a
Contracting State except when the ship, aircraft or motor vehicle is operated
solely between places in the other Contracting State;
(i) the term "national" means, any individual
possessing the nationality of a Contracting State and any legal person,
partnership or association deriving its status from the laws in force in the
Contracting State;
(j) the term "person" includes an individual, a
company, a body of persons and any other entity which is treated as a taxable
unit under the taxation laws in force in the respective Contracting States;
(k) the term "tax" means Indian tax or Uzbekistan tax as
the context requires, but shall not include any amount which is payable is respect
of any default or omission in relation to the taxes to which this Agreement
applies or which represents a penalty imposed relating to those taxes.
2. As regards the
application of the Agreement by a Contracting State, any term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which the Agreement
applies.
Article 4
Resident
1. For the purposes of
this Agreement the term "resident of a Contracting State" means any
person who, under the laws of that State, is liable to tax therein by reason of
his domicile, residence, place of management or any other criterion of a
similar nature.
2. Where by reason of the
provisions of paragraph 1, an individual is a resident of both Contracting
States then his status shall be determined as follows:
(a) he shall be deemed to be a resident of that State in which he
has a permanent home available to him; if he has a permanent home available to
him in both States; he shall be deemed to be a resident of the State with which
his personal and economic relations are closer (center of vital interests);
(b) if the State, in which he has his center of vital interests
cannot be determined, or if he has not a permanent home available to him in
either State, he shall be deemed to be a resident of the State in which he has
an habitual abode;
(c) if he has an habitual abode in both States or in neither of
them, he shall be deemed to be a resident of the State of which he is a national;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting State shall settle the question by
mutual agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then he shall be deemed to be a resident of the State
in which his place of effective management is situated.
Article 5
Permanent establishment
1. For the purposes of
this Agreement the term "permanent establishment" means a fixed place
of business, through which the business of the enterprise is wholly or partly
carried on.
2. The term
"permanent establishment" includes especially:
(a) a place of management;
(b) a
branch;
(c) an
office;
(d) a
factory;
(e) a workshop;
(f) a mine,
an oil or gas well, quarry or any other place of extraction of natural
resources;
(g) a building site or a construction or an
assembly project or supervisory activities in connection therewith; but only
where such site, project or activity continues for a period of more than twelve
months.
3. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:
(a) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise, or of collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the
purpose of carrying on for the enterprise, any other activity of a preparatory
or auxiliary character.
4. Notwithstanding the
provisions of paragraphs 1 and 2, where a person -- other than an agent of
independent status to whom paragraph 5 applies is acting on behalf of an
enterprise and has, and habitually exercises, in a Contracting State an
authority to conclude contracts on behalf of the enterprise, that enterprise
shall be deemed to have a permanent establishment in that State in respect of
any activities which that person undertakes for the enterprise, unless the
activities of such person are limited to those mentioned in paragraph 3 of this
Article, which if exercised through a fixed place of business would not make
this fixed place of business a permanent establishment under the provisions of
that paragraph.
5. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent or any other agent of an
independent status, provided that such persons are acting in the ordinary
course of their business. However, when the activities of such an agent are
devoted wholly or almost wholly on behalf of that enterprise, he will not be
considered an agent of an independent status within the meaning of this
paragraph.
6. The fact that a
company, which is a resident of a Contracting State controls or is controlled
by a company, which is a resident of the other Contracting State, or which
carries on business in that other Contracting State (whether through a
permanent establishment or otherwise), shall not of itself constitute either
company a permanent establishment of the other.
Article 6
Income from immovable
property
1. Income derived by a
resident of a Contracting State from immovable property (including income from
agriculture or forestry) situated in the other Contracting State may be taxed
in that other State.
2. The term
"immovable property" shall have the meaning which it has under the
law of the Contracting State in which the property in question is situated. The
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as immovable
property.
3. The provisions of
paragraph 1 shall apply to income derived from the direct use, letting, or use
in any other form of immovable property.
4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
Article 7
Business profits
1. The profits of an
enterprise of a Contracting State shall be taxable only in that State unless
the enterprise carries on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on business
as aforesaid, the profits of an enterprise may be taxed in the other State but
only so much of them as is attributable directly or indirectly to that
permanent establishment.
The words "directly
or indirectly" mean, for the purposes of this Article, that where a
permanent establishment takes an active part in negotiating, concluding or
fulfilling contracts entered into by the enterprise, then notwithstanding that
other parts of the enterprise have also participated in those transactions,
there shall be attributed to the permanent establishment that proportion of
profits of the enterprise arising out of those contracts as the contribution of
the permanent establishment to those transactions bears to that of the
enterprise as a whole.
2. Subject to the provisions
of paragraph 3, where an enterprise of a Contracting State carries on business
in the other Contracting State through a permanent establishment situated
therein, there shall in each Contracting State be attributed to that permanent
establishment the profits which it might be expected to make if it were a
distinct and separate enterprise engaged in the same or similar activities
under the same or similar conditions and dealing wholly independently with the
enterprise of which it is a permanent establishment.
3. In determining the
profits of a permanent establishment, there shall be allowed as deduction
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so incurred,
whether in the State in which the permanent establishment is situated or
elsewhere in accordance with the provisions of and subject to the limitations
of the tax laws of that State.
4. In so far as it has
been customary in a Contracting State to determine the profits to be attributed
to a permanent establishment on the basis of an apportionment of the total
profits of the enterprise to its various parts, nothing in paragraph 2 shall
preclude that Contracting State from determining the profits to be taxed by
such an apportionment as may be customary, the method of apportionment adopted
shall however, be such that the result shall be in accordance with the
principles contained in this Article.
5. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of the
preceding paragraph, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.
7. Where profits include
item of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the provisions
of this Article.
Article 8
Shipping, air and motor
transport
1. Profits derived by an
enterprise of a Contracting State derived from operation of aircraft or motor
vehicles in international traffic shall be taxable only in that State.
2. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.
3. For the purposes of
this Article, interest on funds connected with the operation of aircraft or
motor vehicles in international traffic shall be regarded as profits derived
from the operation of such aircraft or motor vehicles, and the provisions of
Article 11 shall not apply in relation to such interest.
4. The term
"operation of aircraft" shall mean business of transportation by air
of passengers, mail, livestock or goods carried on by the owners or lessees or
charterers of aircraft, including the sale of tickets for such transportation
on behalf of other enterprise, the incidental lease of aircraft and any other
activity directly connected with such transportation.
5. Profits derived by an
enterprise from operation of ships shall be taxable in the Contracting States
in accordance with their domestic laws.
Article 9
Associated enterprises
Where
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State, or
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
Article 10
Dividends
1. Dividends, paid by a
company, which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State.
2. However, such dividends
may also be taxed in the Contracting State of which the company paying the
dividends is a resident, and according to the laws of that State, but if the
recipient is the beneficial owner of the dividends the tax so charged shall not
exceed 15% of gross amount of the dividends.
This paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term
"dividends" as used in this Article means income from shares or from
other rights, not being debt-claims participating in profits as well as the
income from other corporate rights, which is subjected to the same taxation
treatment as income from shares by the laws of State of which the company
making the distribution is a resident.
4. Provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other
Contracting State of which the company paying the dividends is a resident
through a permanent establishment situated therein or performs in that other
State independent personal services from a fixed base situated therein, and the
holding in respect of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such case, the provisions
of Article 7, or Article 15, as the case may be, shall apply.
5. Where a company which
is a resident of a Contracting State, derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company except in so far as such dividends are paid to a resident
of that other State or in so far as the holding in respect of which the
dividends are paid is effectively connected with a permanent establishment or a
fixed base situated in that other State, not subject the company's undistributed
profits to a tax on the company's undistributed profits even if the dividends
paid or the undistributed profits consist wholly or partly of profits or income
arising in such other State.
Article 11
Interest
1. Interest arising in a
Contracting State and paid to a resident of the other Contracting State, may be
taxed in that other State.
2. However, such interest
may also be taxed in the Contracting State in which it arises and according to
the laws of that State, but if the recipient is the beneficial owner of the
interest the tax so charged shall not exceed 15 per cent of the gross amount of
the interest.
3. Notwithstanding the
provisions of paragraph 2,
(a) interest arising in a Contracting State shall be exempt from
tax in that State provided it is derived and beneficially owned by:
(i) the Government, a political
sub-division or a local authority of the other Contracting State; or
(ii) the
Central Bank of the other Contracting State;
(b) interest arising in a Contracting State shall be exempt from
tax in that Contracting State to the extent approved by the Government of that
State if it is derived and beneficially owned by any person other than a person
referred to in sub-paragraph (a) who is a resident of the other Contracting
State provided that the transaction giving rise to the debt-claim has been
approved in this regard by the Government of the first-mentioned Contracting
State.
4. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in debtor's profits, and in particular, income from
government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures. Penalty charges
for late payment shall not be regarded as interest for the purpose of this
Article.
5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the interest
being a resident of a Contracting State carries on business in the other
Contracting State in which the interest arises, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein and the debt-claim in
respect of which the interest is paid effectively connected with such permanent
establishment or fixed base. In such case the provisions of Article 7 or
Article 15, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the indebtedness in which the interest
is paid was incurred and such interest is borne by such permanent establishment
or fixed base, then such interest shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is situated.
7. Where, by reason of a
special relationship between payer and the beneficial owner or between both of
them and some other person, the amount of interest having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner, in the absence of such
relationship, the provisions of this Article shall apply only to the last
mentioned amount. In such case, the excess part of the payments shall remain
taxable according to the laws of each Contracting State, due regard being had
to the other provisions of this Agreement.
Article 12
Royalties
1. Royalties arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2. However, such royalties
may also be taxed in the Contracting State in which they arise, and according
to the laws of that State, but if the recipient is the beneficial owner of the
royalties the tax so charged shall not exceed 15 per cent of gross amount of
royalties.
3. The term
"royalties" as used in this article means payments of any kind,
received as a consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work, including cinematograph films, or
films or tapes used for radio or television broadcasting, any patent, trade
mark, design or model, plan, secret formula or process or for the use of, or
the right to use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific experience.
4. The provisions of
paragraphs 1 and 2 shall not apply, if the beneficial owner of the royalties
being a resident of a Contracting State carries on business in the other
Contracting State in which the royalties arise through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the right or property
in respect of which the royalties are paid is effectively connected with such
permanent establishment or fixed base. In such a case the provisions of Article
7 or Article 15, as the case may be, shall apply.
5. Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties whether he is a resident of a
Contracting State or not has in a Contracting State a permanent establishment
or a fixed base in connection with which the liability to pay the royalties was
incurred and such royalties are borne by such permanent establishment or fixed
base, then such royalties shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.
6. Where, by reason of a
special relationship between payer and the beneficial owner or between both of
them and some other person, the amount of royalties, having regard to the use,
right or information, for which they are paid, exceeds the amount which would
have been agreed upon by payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payment shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Agreement.
Article 13
Technical fees
1. Technical fees arising
in a Contracting State and paid to a resident of the other Contracting State
may be taxed in that other State.
2. However, such technical
fees may also be taxed in the Contracting State in which they arise, and
according to the laws of that State; but if the recipient is the beneficial
owner of the technical fees, the tax so charged shall not exceed 15 per cent of
the gross amount of the technical fees.
3. The term
"technical fees" as used in this Article means payments of any kind
to any person other than to an employee of the person making the payments, in
consideration for any services of a technical, managerial or consultancy
nature.
4. The provisions of
paragraphs 1 and 2 shall not apply, if the beneficial owner of the technical
fees being a resident of a Contracting State carries on business in the other
Contracting State in which the technical fees arise through a permanent
establishment situated therein, or performs in that other State independent
personal services and the technical fees are effectively connected with such
permanent establishment or such services. In such case the provisions of
Article 7 or Article 15, as the case may be, shall apply.
5. Technical fees shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a statutory body thereof, or a
resident of that State. Where, however, the person paying the technical fees
whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base in connection with which the
obligation to pay the technical fees was incurred and such technical fees are
borne by that permanent establishment or fixed base then such technical fees
shall be deemed to arise in the Contracting State in which permanent
establishment is situated.
6. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person the amount of the technical fees paid, exceeds
for whatever reason, the amount which would have been agreed upon by the payer
and the beneficial owner in the absence of such relationship, the provisions of
this Article shall apply only to the last-mentioned amount. In such case, the
excess part of the payment shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Agreement.
Article 14
Capital gains
1. Gains derived by a
resident of a Contracting State from the alienation of immovable property,
referred to in Article 6 and situated in the other Contracting State may be
taxed in that other Contracting State.
2. Gains from the
alienation of movable property forming part of the business property of a
permanent establishment, which an enterprise of a Contracting State has in the
other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purposes of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or with the
whole enterprise) or of such fixed base, may be taxed in that other State.
3. Gains from the
alienation of ships or aircraft operated in international traffic or movable
property pertaining to the operation of such ships or aircraft, shall be
taxable only in the Contracting State of which alienator is a resident.
4. Gains from the
alienation of shares of the capital stock of a company the property of which
consists directly or indirectly principally of immovable property situated in a
Contracting State may be taxed in that State.
5. Gains from the
alienation of shares, other than those mentioned in paragraph 4, in a company
which is a resident of a Contracting State may be taxed in that State.
6. Gains from the
alienation of any property, other than that mentioned in paragraphs 1, 2, 3, 4
and 5 shall be taxable only in the Contracting State of which the alienator is
a resident.
Article 15
Independent personal
services
1. Income derived by a
resident of a Contracting State in respect of professional services or other independent
activities of a similar character shall be taxable only in that State except in
the following circumstances when such income may also be taxed in the other
Contracting State:
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities; in that
case, only so much of the income as is attributable to that fixed base may be
taxed in that other Contracting State; or
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days in the relevant
fiscal year; in that case, only so much of the income as is derived from his
activities performed in that other State may be taxed in that other State.
2. The term
"professional services" includes especially independent scientific,
literary, artistic, educational or teaching activities as well as the
independent activities of physicians, surgeons, lawyers, engineers, architects,
dentists, accountants and other such professions.
Article 16
Dependent personal
services
1. Subject to the
provisions of Articles 17, 18, 19, 20, 21 and 22, salaries, wages and other
similar remuneration, derived by a resident of a Contracting State in respect
of an employment shall be taxable only in that State unless the employment is
exercised in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in that other States.
2. Notwithstanding the
provisions of paragraph 2, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State if:
(a) the recipient is present in the other Contracting State for a
period or periods not exceeding in the aggregate 183 days in the relevant
fiscal year; and
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the other Contracting State; and
(c) the remuneration is not borne by a permanent establishment or
a fixed base which the employer has in the other Contracting State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State shall be taxable only in that
State.
Article 17
Director's fees
Director's fees and
similar payments, derived by a resident of a Contracting State in his capacity
as a member of the Board of Directors of a company, which is a resident of the
other Contracting State, may be taxed in that other State.
Article 18
Income earned by
entertainers and sportspersons
1. Notwithstanding the
provisions of Articles 15 and 16, income derived by a resident of a Contracting
State as an entertainer, such as a theatre, motion picture, radio or television
artists, or a musician, or as a sportsperson, from the personal activities as
such exercised in the other Contracting State, may be taxed in that other
State.
2. Where income in respect
of personal activities exercised by an entertainer or sportsperson in his
capacity as such accrues not to the entertainer or sportsperson himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
15 and 16, be taxed in the Contracting State in which the activities of the
entertainer or sportsperson are exercised.
3. Notwithstanding the
provisions of paragraph 1, income derived by an entertainer or a sportsperson
who is a resident of a Contracting State from his personal activities as such
exercised in the other Contracting State shall be taxable only in the
first-mentioned Contracting State, if the activities in the other Contracting
State are supported wholly or substantially from the public funds of the
first-mentioned Contracting State, including any of its political sub-division
or a local authorities.
4. Notwithstanding the
provisions of paragraph 2 and Articles 7, 15 and 16, where income in respect of
personal activities exercised by an entertainer or a sportsperson in his
capacity as such in a Contracting State accrues not to the entertainer or
sportsperson himself but to another person, that income shall be taxable only
in the other Contracting State, if that other person is supported wholly or
substantially from the public funds of that other State, including any of its
political sub-division or local authorities.
Article 19
Remuneration and pensions
in respect of Government service
1. (a) Remuneration, other
than a pension, paid by a Contracting State or a political sub-division, or a
local authority thereof to an individual in respect of services rendered to
that State or sub-division or authority shall be taxable only in that State.
(b) However, such
remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of
that State who:
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension paid
by, or out of funds created by, a Contracting State or political sub-division,
or a local authority thereof to any individual in respect of services rendered
to that State or sub-division or local authority thereof shall be taxable only
in that State.
(b) However, such pension
shall be taxable only in the other Contracting State if the individual is a
resident of and a national of that other State.
3. The provisions of
Articles 16, 17 and 18 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof, income shall be
taxable only in the other Contracting State, if that other person is supported
wholly or substantially from the public funds of that other State, including
any of its political sub-division or local authorities.
Article 20
Non-Government pensions
and annuities
1. Any pension, other than
a pension referred to in Article 19, or any annuity derived by a resident of a
Contracting State from sources within the other Contracting State may be taxed
only in the first mentioned Contracting State.
2. The term
"pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of
performance of services.
3. The term
"annuity" means a stated sum payable periodically at stated times
during life or during a specified or ascertainable period of time, under an
obligation make the payments in return for, adequate and full consideration in
money's worth.
Article 21
Payments received by
students and apprentices
1. A student or business
apprentice who is or was a resident of a Contracting State immediately before
visiting the other Contracting State and who is present in that other
Contracting State solely for the purpose of his education or training shall be
exempt from tax in that other State on:
(a) payments made to him by persons residing
outside that other State for the purposes of his maintenance, education or
training; and
(b) remuneration from employment in that
other State, in an amount not exceeding US $ 700 or its equivalent amount
during any fiscal year,
as that case may be,
provided that such employment is directly related to his studies or is
undertaken for the purpose of his maintenance.
2. The benefits of this
Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken, but in
no event shall any individual have the benefits of this Article for more than
three consecutive years from the date of his first arrival in that other
Contracting State.
Article 22
Payments received by
professors, teachers and research scholars
1. A professor or teacher
who is or was a resident of the Contracting State immediately before visiting
the other Contracting State for the purpose of teaching or engaging in
research, or both, at a university, college, school or other approved
institution in that other Contracting State shall be exempt from tax in that
other State on any remuneration for such teaching or research for a period not
exceeding two years from the date of his arrival in that other State.
2. This Article shall not
supply to income from research, if such research is undertaken primarily for
the private benefit of a specific person or persons.
3. For the purposes of
this Article and Article 21, an individual shall be deemed to be a resident of
a Contracting State if he is resident in that State or in the immediately
preceding fiscal year.
4. For the purposes of
paragraph 1 "approved institution" means an institution which has
been approved in this regard by the competent authority of the concerned
Contracting State.
Article 23
Other income
1. Subject to the provisions
of paragraph 2, items of income of a resident of a Contracting State, wherever
arising, which are not expressly dealt with in the foregoing articles of this
Agreement, shall be taxable only in that Contracting State.
2. The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such
income being a resident of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right of property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such a case the provisions of Article 7 or Article 15, as the case may be,
shall apply.
3. Notwithstanding the
provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing articles of this Agreement
and arising in the other Contracting State may also be taxed in that other
Contracting State.
Article 24
Capital
1. Capital represented by
immovable property referred to in Article 6, owned by a resident of a
Contracting State and situated in the other Contracting State, may be taxed in
that other State.
2. Capital represented by
movable property, forming part of the business property of a permanent
establishment, which an enterprise of a Contracting State has in the other
Contracting State or by movable property pertaining to a fixed base available
to a resident of a Contracting State in the other Contracting State for the
purpose of performing independent personal services may be taxed in that other
State.
3. Capital represented by
ships, aircraft or motor vehicle operated in international traffic and by
movable property pertaining to the operation of such ships, aircraft or motor
vehicles, shall be taxable only in the Contracting State of which the
enterprise owning such property is a resident.
4. All other elements of
capital of a resident of a Contracting State shall be taxable only in that
State.
Article 25
Avoidance of double
taxation
1. The laws in force in
either of the Contracting States will continue to govern the taxation of income
in the respective Contracting States except where provisions to the contrary
are made in this Agreement.
2. Where a resident of
India derives income or owns capital which, in accordance with the provisions
of this Agreement, may be taxed in Uzbekistan, India shall allow as a deduction
from the tax on the income of that resident an amount equal to the income-tax
paid in Uzbekistan, whether directly or by deduction; and as a deduction from
the tax on the capital of that resident an amount equal to the capital tax paid
in Uzbekistan. Such deduction in either case shall not, however, exceed that
part of income-tax or tax on capital (as paid before the deduction is given),
which is attributable to the income or the capital which may be taxed in Uzbekistan.
3. In the case of
Uzbekistan the double taxation shall be avoided by a method which is identical
to that mentioned in paragraph 2.
4. The tax payable in the
Contracting State mentioned in paragraphs 2 and 3 of this Article shall be
deemed to include the tax which would have been payable but for the tax
incentives granted under the laws of the Contracting State and which are
designed to promote economic development.
5. Income which in
accordance with the provisions of this Agreement, is not to be subjected to tax
in a Contracting State, may be taken into account for calculating the rate of
tax to be imposed in that Contracting State.
Article 26
Non-discrimination
1. The national of a
Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals of
that other State in the same circumstances are or may be subjected.
2. The taxation on a permanent
establishment which an enterprise of a Contracting State has in the other
Contracting State shall not be less favourably levied in that other State than
the taxation levied on enterprise of that other State carrying on the same
activities in the same circumstances. This provision shall not be construed as
preventing a Contracting State from charging the profits of a permanent
establishment which an enterprise of the other Contracting State has in the
first mentioned Contracting State at a rate higher than that imposed on the
profits of a similar enterprise of the first mentioned State, nor as being in
conflict with the provisions of paragraph 3 of Article 7 of this Agreement.
3. Nothing contained in
this Article shall be construed as obliging a Contracting State to grant to
persons not resident in that State any personal allowances, reliefs, reductions
and deductions for taxation purposes which are by law available only to persons
who are so resident.
4. Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first mentioned State are or may be subjected in
the same circumstances.
5. In this Article, the
term "taxation" means taxes which are the subject of this Agreement.
Article 27
Mutual Agreement Procedure
1. Where a resident of a
Contracting State considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with this
Agreement, he may notwithstanding the remedies provided by the national laws of
those States, present his case to the competent authority of the State of which
he is a resident. The case must be presented within three years from the date
of receipt of the first notice of the action resulting in taxation not in
accordance with the provisions of the Agreement.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation not in accordance with the Agreement.
Any agreement reached shall be implemented notwithstanding any time limits in
the national laws of the Contracting State.
3. The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Agreement. They may also consult together for the
elimination of double taxation in cases not provided for in the Agreement.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a Commission
consisting of representatives of the competent authorities of the Contracting
States.
Article 28
Exchange of information
1. The competent
authorities of the Contracting States shall exchange such information
(including documents) as is necessary for carrying out the provisions of the
Agreement or of the domestic laws of the Contracting States concerning taxes
covered by the Agreement insofar as the taxation thereunder is not contrary to
the Agreement, in particular for the prevention of fraud or evasion of such
taxes. Any information received by a Contracting State shall be treated as secret
in the same manner as information obtained under the domestic laws of that
State. However if the information is originally regarded as secret in the
transmitting State, it shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Agreement. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings in
judicial decisions. The competent authorities shall through consultation,
develop appropriate conditions, methods and techniques concerning the matter in
respect of which such exchange of information shall be made, including, which
appropriate, exchange of information regarding tax avoidance.
2. The exchange of
information or documents shall be either on a routine basis or on request with
reference to particular cases or both. The competent authorities of the
Contracting States shall agree from time to time on the list of the information
or documents which shall be furnished on a routine basis.
3. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:
(a) to carry out administrative measures at variance with the
laws and the administrative practice of that or of the other Contracting State;
(b) to supply information or documents which are not obtainable
under the laws or in the normal course of the administration of that or of the
other Contracting State;
(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade process or
information, the disclosure of which would be contrary to public policy.
Article 29
Diplomatic and consular
activities
Nothing in this Agreement
shall affect the fiscal privileges of diplomatic or consular officials under
the general rules of international law or under the provisions of special
agreements.
Article 30
Entry into force
Each of Contracting States
shall notify to the other the completion of the procedures required by its law
for the bringing into force of this Agreement. This Agreement shall enter into
force on the date of the later of these notifications and shall thereupon have
effect:
(a) In India: in respect of income arising in any previous year
beginning on or after the 1st April, 1993 and in respect of capital which is
held at the expiry of any previous year beginning on or after 1st April, 1993;
(b) In Uzbekistan: in respect of income arising in any year of
income beginning on or after the 1st January, 1993 and in respect of capital
which is held at the expiry of any year of income beginning on or after 1st
January, 1993.
Article 31
Termination
This Agreement shall
remain in force indefinitely but either of the Contracting States may, on or
before 30th June in any calender year beginning after the expiration of a
period of five years from the date of its entry into force, give the other
Contracting State through Diplomatic Channels, written notice of termination
and, in such event, this Agreement shall cease to have effect:
(a) In India: in respect of income arising in any previous year
beginning on or after the 1st April next following the calender year in which
the notice is given and in respect of capital which is held at the expiry of
any previous year beginning on or after 1st April next following the calender
year in which the notice of termination is given;
(b) In Uzbekistan: in respect of income arising in any year of
income beginning on or after the 1st January next following the calender year
in which the notice is given and in respect of capital which is held at the
expiry of any year of income next following the calender year in which the
notice of termination is given.
IN WITNESS WHEREOF the
undersigned, being duly authorized thereto, have signed the present Agreement.
DONE at New Delhi in
duplicate this 29th day of July One thousand nine hundred and ninety-three in
Hindi, Uzbek and English languages, all the texts being equally authentic. In
case of divergence between any of the texts, the English text shall be the
operative one.